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May 05, 2022 03:27 PM

Polypropylene pricing on the move, more volatility likely

Frank Esposito
Senior Staff Reporter
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    Polypropylene resin prices were on the move again in April, and multiple recent force majeure declarations have the market expecting more pricing volatility.

    North American prices for polypropylene resin declined by an average of 1 cent per pound in April.

    The 1-cent April drop matched a similar change in price for polymer-grade propylene (PGP) monomer.

    PP prices had been up 10 cents in March and 6 cents in February, again matching PGP. Prior to those moves, regional PP prices had declined a total of 43 cents between September and January.

    North American PP supplies now are being tightened by several production issues, with this tightness potentially leading to higher resin prices for May.

    Events affecting North American PP supplies began in late March when LyondellBasell Industries and Ineos Olefins & Polymers each reported production challenges. In a March 30 letter to customers, officials with LBI in Houston announced force majeure supply limits on 32 PP grades made in Lake Charles, La., because of mechanical failure of a gearbox.

    "This equipment failure, which was beyond our reasonable control, will impact our [PP] extrusion capacity, and will therefore limit our ability to produce certain grades of PP," they added. Allocations of PP resin to LBI customers will be calculated based on purchase history of the affected grades between September and February.

    On March 31, officials with Ineos O&P in Houston reported that the firm on March 30 "had suffered a manufacturing breakdown and/or failure" at its PP facility in Carson, Calif., as a result of a power outage. The firm placed force majeure supply limits on 16 PP grades made in Carson.

    The LBI and Ineos incidents already were affecting regional PP supplies when officials with TotalEnergies in Houston on April 29 said that the firm "is currently experiencing a shortage of additive required for the manufacture of certain grades of PP." As a result, they placed force majeure supply limits on 15 PP grades.

    "Due to this situation, production and shipment of the above grades will be curtailed until further notice," TotalEnergies officials said in a letter to customers. "Given the uncertainties involved, we are unable at this time to provide an estimate of the date normal production and delivery of these grades will resume."

    The force majeure announcements likely have tightened PP supplies in the region, according to Esteban Sagel, principal of Chemical & Polymer Market Consultants in Houston.

    "Domestic logistics in North America are also complicated, further muddling the supply picture," Sagel said in an email to Plastics News. "If demand continues to be strong, there will definitely be pressure for [PP] prices to move higher."

    In 2021, PP importers "were burnt by the delays in deliveries and increased costs from domestic logistics," Sagel added. "That said, I wouldn't be surprised if there is increased interest for imports into North America, and not just PP imports."

    Maintenance turnarounds and related issues caused LBI's first-quarter PP sales in the Americas to drop about 3 percent to around 480 million pounds, officials said in a first-quarter earnings release. The firm's production of propylene monomer in the region declined 21 percent for similar reasons.

    In the release, interim CEO Ken Lane was optimistic about the second quarter and beyond.

    "We expect typical improvements in summer seasonal demand will extend market strength for [LBI's] products as the global economy continues to navigate geopolitical uncertainty and volatile costs for energy and feedstocks," Lane said.

    Lane added that, outside of China, LBI anticipates benefits from continued demand for consumer packaging, improving volumes for automotive polymer compounds and seasonal demand for durable goods used in building and construction markets.

    But a recent commentary from New York area PP supplier Blue Clover LLC raised some doubts for PP and other materials.

    "There's concern among household product producers that demand is softening as consumers wallets are hit by inflation in food and energy, and what money is left is spent on travel and leisure as opposed to household items," Blue Clover officials said.

    They pointed out that appliance maker Whirlpool Corp. saw first-quarter sales drop 9 percent vs. the same quarter in 2021. "Higher prices of resin also are causing consumer goods companies to raise material costs," Blue Clover said. "Whirlpool projected up to $1.75 billion of additional material inflation this year — an increase of $600 million from its previous estimate — as a result of higher steel and resin costs."

    The ongoing Ukraine crisis also has put pressure on global oil and gas markets — which affect resin prices — since late February. West Texas Intermediate oil prices opened March at $95.70 per barrel but closed May 4 at $107.80 for an increase of almost 13 percent. Markets for natural gas started March at $4.40 per million British thermal units, but had soared to $8.42 — a hike of more than 90 percent — by May 4.

    North American PP supplies will be boosted later this year when Inter Pipeline Ltd.'s Heartland Petrochemical Complex brings more than 1 billion pounds of new capacity online in Strathcona County, Alberta. ExxonMobil Chemical also will add almost 1 billion pounds of capacity for polypropylene resin in Baton Rouge, La., by the end of the year.

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