North American commodity resin prices started 2024 in full stride, with prices for two materials up in January, while prices for two others declined.
Polyethylene and polypropylene resins started the year with higher prices. Prices for all grades of high, low and linear low density PE were up 5 cents per pound in January, with prices for PP in the region up 3 cents, according to market sources contacted by Plastics News.
PE prices had been flat for the previous three months, while PP prices were flat in December after increasing in each of the previous three months.
The 5-cent PE hike was fought by buyers but ultimately went through, as PE makers leveraged production issues that hit the Gulf Coast after freezing weather in mid-January.
Ethylene and propylene units operated by Formosa Plastics Corp. USA in Point Comfort, Texas, were affected by the cold. Major PE makers now are seeking a 5-cent increase for February.
Both Ineos Olefins & Polyolefins USA and Chevron Phillips Chemical Co. had reduced operating rates in January because of the cold weather. Ineos took that action on an ethylene cracker at its Chocolate Bayou plant in Alvin, Texas, while Nova Chemicals shut down a site in Geismar, La., making ethylene, propylene and butadiene.
Market analyst Mike Burns with Plastic Resin Market Advisors said PE inventories on the processor level are "healthy," as many buyers bought in December to fill their needs for early 2024. He added that North American PE makers had "a big export month" in January.
North American PE makers "have been quite successful in increasing their exports, in line with the expansion of capacity," according to Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston.
Historically, as recently as the mid-2000s, exports made up only about 20 percent of North American PE sales. Since that point, increased access to shale gas and oil feedstocks have allowed producers to add large amounts of capacity with an eye on the export market. Exports now account for more than 40 percent of North American PE sales.
Sagel said the increased reliance on exports "comes at a price" for North American PE makers.
"The new reality for exporters is that they had to change the mix in their trade portfolios," he added, moving their focus from North and South America to Northeast and Southeast Asia.
In the U.S., Sagel said, PE profit margins on domestic sales are the lowest they've been in a decade, so producers "will do everything they can to try to keep them from falling further."
These factors also were reflected in recently reported full year 2023 results for Dow Inc.'s Packaging & Specialty Plastics unit, including one of the world's largest polyethylene resin businesses. For the year, P&SP had sales of $23.1 billion — down 21 percent — and operating profit of $2.7 billion — down 34 percent.