Polymer Points: Most resin prices take a July slide, with PS the exception

North American commodity resin prices were on the move in July, with four materials falling and one seeing a sizable increase.

Improving supplies and softening demand sent North American prices for polyethylene, polypropylene, PVC and PET bottle resin down in July. PP continued its downward slide, tumbling 7 cents in July after a 10-cent drop in June. PET bottle resin prices dropped 12 cents in July, PE prices fell an average of 3 cents per pound and PVC fell 5 cents.

The 7-cent July drop for PP matched a 4-cent drop in polymer-grade propylene (PGP) monomer feedstock and was increased by PP buyers winning an additional 3 cents from suppliers. Combined with other increases and decreases, PP prices now are down a net of 12 cents so far in 2022.

Market sources told Plastics News that regional PP demand has declined slightly in recent months. Strong North American gasoline demand also had increased supplies of propylene, which is a byproduct of gas refining.

PET bottle resin's 12-cent drop gave back almost all of a 13-cent June increase. Even with the July drop, prices for the materials are up a net of 36 cents so far in 2022. According to market sources, the July PET price decline was the result of a large price decrease for paraxylene (PX) feedstock, combined with lower demand and higher inventories of PET.

Strong seasonal demand for bottled water and other beverages had played a role in earlier PET price increases, as well as a lack of new capacity and freight and logistics challenges. Higher gasoline demand had lifted prices for PX, which also is used as a gasoline additive.

PE prices fell 3 cents after a flat June and a 3-cent hike in May that producers won after an extended battle. Prices for all grades of PE now are up a net of 4 cents so far in 2022.

Dow Inc.'s Packaging and Specialty Plastics unit, including PE resin, saw second-quarter sales grow 15 percent to $8.2 billion. The unit's sales volume was up 5 percent for the quarter, primarily from gains in energy, infrastructure and packaging.

At LyondellBasell Industries, the firm's olefins and polyolefins Americas unit, including PE and polypropylene, posted second-quarter sales growth of 9 percent to almost $4.1 billion. The unit's PE resin sales volume in pounds grew 6 percent to 1.75 billion pounds for the quarter.

Regional PE supplies will be impacted this year by the startup of Shell Chemical's massive 3 billion-pound-capacity PE unit in Monaca, Pa. Market watchers said the site could be shipping commercial amounts of PE by the end of summer.

"I am — and I am sure converters are as well — concerned about where the economy may be headed," said Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston. "Uncertainty about the economy, together with erosion in spot prices, likely has [PE and PP] buyers on the sidelines waiting for prices to continue to slide."

For suspension PVC, a 5-cent drop ended two months of flat pricing. Regional PVC prices now are down a net of 4 cents since Jan. 1. Construction activity is a main driver of PVC consumption. U.S. housing start activity in June came in at an annual rate of almost 1.69 million, up more than 1 percent vs. the same month in 2021, but down almost 1 vs. May. This trend might be an indication of PVC demand leveling off.

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." The report added that U.S. polymer prices, on average, "continue to reflect a price premium to export markets."

Polystyrene was the only commodity resin to see higher prices in July, and the market outdid itself with an attention-grabbing 20-cent hike. A chaotic market for benzene feedstock sent PS prices soaring but could be sending them down about the same amount in August.

PS prices moved up an average of 20 cents per pound in July, as benzene prices ballooned 42 percent to $6.82 per gallon. Benzene is used to make styrene monomer, which is then polymerized into PS. PS prices had been up 9 cents in June and are up a total of 52 cents since February.

But a turnaround could be right around the corner, as contract benzene prices for August closed at $4.52 per gallon, a plunge of 33 percent vs. July. Major regional PS makers have announced price decreases of 15-25 cents for August, a rare step.

Tight supplies and high prices for U.S. gasoline had driven benzene prices higher in recent months. Benzene is added to gas to increase its octane rating, which can improve engine performance. Average U.S. gas prices peaked at just over $5 per gallon in mid-June but have since declined and were just under $4 on Aug. 10. That change has impacted benzene markets as well.

"The benzene market has been wild this year, to say the least," said Shayan Malayerizadeh, a market analyst with PetroChem Wire in Houston. In an email, Malayerizadeh said there were several factors that led to higher prices for the material.

The U.S. Gulf Coast benzene market "is structurally short," he said.

"We rely heavily on imports to balance out the market," he added. That dependency grew even more last year when Phillips 66 removed some capacity for the material, while imports between mid-2021 and mid-2022 were "well below historical average."

The market then took a quick turn in July and August, with octane values falling and styrene producers starting to reduce rates and selling their benzene inventory back. Because of increased imports and reduced export options, there's now a possibility that some U.S. styrene producers will idle their plants, Malayerizadeh said.

North American prices for ABS resins went in the opposite direction in July, decreasing by an average of 10 cents per pound. Increasing inventories and improved availability of imports made up for higher prices for styrene monomer. Market sources said that further price reductions for ABS and other engineering resins could hit the market in August and later in 2022.

In feedstocks, oil and natural gas prices went in drastically different directions in July. West Texas Intermediate oil prices opened the month at $105.80 per barrel but dropped to $98.60 by the end of the month, for a decline of almost 7 percent. Prices since that point have slid another 12 percent to close at $86.50 on Aug. 17.

Markets for natural gas, used as a feedstock to make PE and PVC, started July at $5.42 per million British thermal units but surged almost 52 percent to $8.23 by the end of the month. Those prices have continued to rise, moving up another 13 percent to close at $9.33 on Aug. 17.