North American prices for polyethylene and polypropylene resins both dropped in August.
Regional prices for all grades of PE were down an average of 4 cents per pound, while PP prices ticked down an average of 1 cent, according to buyers contacted by Plastics News.
Improving supplies and softening demand were behind the price drops. PE prices had declined by 3 cents in July after being flat in June. Prices for all grades of PE now are up a net of 1 cent so far in 2022.
PE giant Dow Inc. made waves late last month when it announced plans to temporarily reduce global nameplate capacity for that material by approximately 15 percent. A spokesman for Dow in Midland, Mich., told PN that the move is not based on current capacity utilization rates.
In an Aug. 24 letter to customers, Dow Packaging and Specialty Plastics President Diego Donoso said that the cutback was tied to "continued global logistics constraints," including port and rail congestions in the U.S. Gulf Coast and "dynamic conditions" in Europe.
Dow operates about 17 billion pounds of global PE capacity, including about 7 billion pounds in the U.S. Taking out 15 percent of capacity would remove about 2.6 billion pounds from production, roughly the equivalent of one world-scale PE unit. The Dow production cuts come at a time when Shell Polymers plans to add more than 3 billion pounds of PE capacity at a new petrochemical complex near Pittsburgh by the end of the year.
The Dow action is "an understandable move in the current marketplace, and I wouldn't be shocked to see other producers act similarly," said Jeremy Pafford, North America head at data firm ICIS in Houston.
"Just in North America, PE inventories are near record levels at a time when additional production capacity is set to come online," he added. "Pulling back on production is a logical economic decision in the short term until the market can soak up some of these inventories."
Major PE makers now are attempting to raise prices by 5 cents per pound effective Sept. 1. One PE market watcher told PN that the North American spot market for PE "is going to tighten up significantly" because of the increase attempt and production cuts.
The 1-cent PP drop is the third consecutive monthly decline for that material. Prices had gone down 7 cents in July and 10 cents in June.
Prices for PGP monomer actually increased by 2 cents in August, but buyers were able to take back 3 cents in margin from suppliers, resulting in the 1-cent decline. Combined with other increases and decreases, PP prices now are down a net of 13 cents so far in 2022.
"It seems the floor has been reached in PP as suppliers push back," one PP market watcher told PN. "But these current market conditions will only last until suppliers are successful in curtailing supply."
New PP supplier Heartland Polymers recently began production of homopolymer resin at a new plant in Strathcona County, Alberta. Once commercial production is underway, Heartland is expected to produce more than 1 billion pounds of PP annually.
The site near Edmonton uses local propane feedstock supplied by parent company Inter Pipeline. The site's primary source of propylene monomer will be an on-site propane dehydrogenation (PDH) plant, which is expected to provide integrated service to the PP plant in the third quarter.
In a recent report, consulting firm C-MACC of Houston said that "given a still wide profit spread between monomer and polymer levels, we foresee downward pressure on domestic U.S. polymer [resin] prices, even considering potential export market support due to curbed production."