North American polypropylene resin prices rose in March, marking the third straight monthly price hike and sixth in seven months for that material.
The March PP increase was an average of 3 cents per pound. As with previous increases, that move followed higher prices for polymer-grade propylene (PGP) monomer. Regional PP prices had jumped 4 cents per pound in February and 3 cents in January. The only month in the last seven that didn't see higher PP prices was December 2023, when prices were flat.
PGP supplies had been tight earlier in 2024 because of mechanical issues at production sites and the effects of a brief cold snap in Texas, where much PGP and PP production is located. Enterprise Products briefly shut down a PDH unit making PGP in Baytown, Texas. Ineos Olefins & Polyolefins also placed force majeure supply limits on PP resin made at its Chocolate Bayou plant in Alvin, Texas, because of mechanical issues.
These recent upswings in PP pricing are at odds with demand for the material, which has been in decline. Officials with materials firm LyondellBasell in Houston said that financial results for the Olefins and Polyolefins–Americas unit were down 25 percent in the fourth quarter of 2023 vs. the previous quarter.
PP supplier BlueClover of New York said in a research report that, based on market dynamics, it expects PGP prices to be lower in April and May. If that takes place, it most likely would lead PP resin prices to decline as well.
On March 27, Blue Clover officials pointed out the physical PGP prices were down 10 cents per pound in the previous two weeks. They added the total PGP price drop in April-May could be 13-16 cents.
"While we have seen some PGP price decreases intramonth in this seven-month PGP bull market, what's happening now appears to be a true correction in which the bull market for PGP will reverse for several months," BlueClover officials said. "We believe that it's difficult for the PGP derivative market — of which PP makes up about 60-70 percent of PGP demand — to absorb PGP pricing north of 50 [cents per pound] for several months in a row.
"It appears PGP supply from PDH units is improving and demand for durable goods is decent but not great," they added.
Regarding the PP market, Blue Clover said, "it's a bit too soon to see this PGP price decrease impact PP pricing, but should the trend in PGP continue, we expect to see follow-through into the PP markets in future months."
"There was more room for PGP [prices] to fall vs. PP, so April may be a month where PP producers gain a little bit of margin back between PGP and PP. For example, if physical PGP pricing is down 10-12 cents, spot physical PP may only be down 5-7 cents, depending on the grade."
BlueClover added recent PP force majeure supply limits "may have actually helped to take some stress off the very tight PGP inventory market."
In a recent PP forecast, market analyst David Barry of PetroChem Wire in Houston said North American PP makers are expected to keep operating rates low, in line with demand forecasts, into 2024.
"Unlike the polyethylene industry, PP lacks a consistent export arbitrage to quickly move excess product when domestic sales fall short," Barry added.
New North American PP capacity opened in 2023 — mainly from Heartland Polymers' 1 billion pound-per-year unit in Western Canada — and more is scheduled to come on line in 2024, Barry said. That likely means that PP makers must either find demand growth or reduce older, less efficient capacity, he added.
"Limping along with operating rates in the low 70 percent range is not a sustainable approach for the long haul," Barry said.
Potential PP capacity additions for 2024 include more than 500 million pounds of additional production form Formosa Plastics Corp. USA in Point Comfort, Texas.
According to Barry, some North American processors have booked PP import volumes for early 2024, taking advantage of competitive prices from Asia and the Middle East to hedge against further price volatility. Propylene supply also could become more balanced in 2024, he said, with fewer unplanned outages at PDH plants and some crackers that had extensive downtime in 2023 returning to service.
