North American polypropylene resin prices declined by an average of 8 cents per pound in May as a result of weaker demand and lower feedstock costs.
The May price drop matched a drop seen in prices for polymer-grade propylene (PGP) feedstock. PP prices had been down 11 cents in April — again matching PGP — after increasing 8 cents in March and being up a total of 27 cents in the first three months of 2023.
First-quarter North American PP demand was down 8 percent vs. the same quarter in 2022. PGP prices "continue to get pushed down by oversupply of polypropylene [resin] and, to a lesser degree, pulled down by propane pricing," officials with New York-based PP supplier Blue Clover LLC said in a market update. They added that they believe there's a 60 percent chance that PGP prices for June will be lower than those seen in May.
Blue Clover added that in the fourth quarter of 2022, North American PP makers "did a tremendous job of increasing PP exports and rationalizing operating rates to [less than] 70 percent. … This helped to rebalance the oversupply glut of PP that we experienced in the fourth quarter 2022 and helped to stabilize the market with increasing PP prices in the first quarter."
But in the first quarter of 2023, export volumes decreased because of "incredible" amounts of Chinese PP resin being exported, while operating rates increased to 75-80 percent. This move, along with new capacity from ExxonMobil, "led to another supply overhang that the market is currently working through."
"Historically, it's very difficult for PP producers to run at an operating rate of less than 80 percent over a long period if all units are up and running," Blue Clover said. "For this reason, we expect the market to remain long, but we do expect producers to use the export and operating rate levers as best they can to support the market in the coming quarters."
North American PP supply was increased in mid-2022 when Heartland Polymers started production at a billion-pound-capacity unit in Strathcona County, Alberta. PP maker Invista also plans to add 100 million pounds of specialty PP capacity through a debottlenecking in Longview, Texas, later this year.