Some resins settle flat in December, but cold weather may bring back volatility

For North American resin prices, 2023 ended with price drops for three commodity resins in December.

Prices for PVC, polystyrene and PET ticked down for the month, while prices for polyethylene and polypropylene were flat, according to market sources contacted by Plastics News.

Flat pricing for PE and PP in December surprised some market watchers who were expecting price drops for the month as suppliers purged their inventories to end the year. PE prices ended the year flat for three straight months after moving up 3 cents in both August and September. Counting those increases, regional PE prices were up a net of 9 cents so far in 2023.

Since domestic PE demand growth wasn't very high, export sales carried the PE market in 2023. 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.

"Supplier production rates and support of record exports is essential to keep balanced inventories and impact current resin price negotiations for the 2024 supply contracts," market analyst Mike Burns said in a recent market update. "It's not likely production rates will decline this year or into Q1 2024."

PP prices were flat in December, ending a streak of three consecutive monthly increases. Polymer-grade propylene (PGP) feedstock prices were flat for the month as well. Prices for PP in the region were up an average of 5 cents per pound for November. Combined with previous increases and decreases, North American PP prices were up a net of 17 cents per pound in 2023.

Supplies of PGP tightened in September and have stayed that way because of production outages at some propane dehydrogenation (PDH) units. Those include challenges at units operated in Texas by Shell Chemical and BASF/TotalEnergies. PGP supplies will be further affected by a Dec. 4 fire at a PDH unit operated by Enterprise Products in Mont Belvieu, Texas. That unit could be down for a month, according to market reports.

Recent upswings in PP pricing are at odds with demand for the material, which has been in decline. Market sources cited American Chemistry Council data that showed North American PP demand was down about 4 percent on a monthly basis in both September and October.

Disruptions to feedstock supplies could allow resin makers to raise prices in January. Temperatures in the Houston area fell below freezing on Jan. 15 and 20, leading several suppliers to reduce rates or to shut down production units. Ethylene and propylene units operated by Formosa Plastics Corp. USA in Point Comfort, Texas, were affected by the cold.

In an email to PN, Formosa spokesperson Amy Blanchett said the firm "has procedures to address severe weather and are implementing those procedures, as necessary."

A report from research firm ICIS added that although materials plants were "avoiding catastrophic shutdowns" such as those related to Winter Storm Uri in February 2021, some sites had been affected. Enterprise Products had shut down a PDH unit making propylene monomer in Baytown, Texas, and Nova Chemicals had shut down a site in Geismar, La., making ethylene, propylene and butadiene.

In an email to PN, Nova spokesperson Jennifer Nanz said that in anticipation of severe weather, the firm "accelerated the planned shutdown" of its Geismar facility for a scheduled turnaround by several days, closing it on Jan. 16. The site is expected to reopen in late March.

Formosa, Enterprise and Chevron Phillips all reported weather-related incidents to the Texas Commission on Environmental Quality (TCEQ). Others reporting incidents on the TCEQ website include Bayport Polymers, ExxonMobil Chemical, Motiva Enterprises and Flint Hills Resources.

As a result of the cold, Ineos Olefins & Polymers USA placed force majeure supply limits on PP resin made at its Chocolate Bayou plant in Alvin, Texas. A Jan. 22 post on the ChemAnalyst website said the action was in response to mechanical failures encountered at the site, which has annual production capacity of about 1 billion pounds of PP.

On Jan. 14, Houston-based Ineos had reduced production of ethylene and propylene monomer at the site. The firm operates almost 4 billion bounds of ethylene capacity and almost 1 billion pounds of propylene capacity there.

Ineos' force majeure declaration "adds to the challenges faced by the [PP] supply chain in the United States," the ChemAnalyst report said.

It added the force majeure status "implies that Ineos is temporarily freed from contractual obligations due to unforeseen circumstances, signaling potential disruptions in the supply chain."

North American prices for PVC declined for the second consecutive month in December, as a seasonal slowdown in construction activity reduced demand for the material. Prices were down an average of 1 cent per pound, matching the drop seen in November. Prior to these decreases, prices had been flat for two consecutive months.

One market source told PN that although exports of PVC from North America increased in December, lower demand and operating rates of only around 75 percent led to the price drop.

"Second-half [PVC] demand was slower than the first half," the source said.

Combining increases and decreases, prices for PVC declined an average of 2 cents per pound in 2023.

In the PS market, prices fell an average of 3 cents per pound in December, following price drops for benzene, which is used to make styrene monomer. One market source attributed the drop to reduced PS demand and "behind-the-scenes discounting."

PS prices had been down 4 cents in November after climbing a total of 12 cents in the previous three months. Benzene prices slumped 8 percent to $3.35 per gallon in December, a drop of 30 cents. Improved domestic supplies helped drive benzene pricing down for the month.

North American PS prices finished 2023 up a net of 1 cent per pound and benzene prices up 28 cents. Global PS markets had to deal with oversupply and low demand growth for most of the year.

PET bottle resin prices dropped a total of 3 cents per pound on average in November and December. Market sources cited lower demand and steady feedstock costs as reasons for the price drop. Prices for the material had dropped 4 cents in October.

PET prices finished 2023 down a net of 4 cents per pound.

In the engineering resins market, North American prices for nylon and polycarbonate resins saw slight declines in the fourth quarter of 2023.

Prices for all grades of nylon 6 and 6/6 were down an average of 5 cents between October and December, with prices for polycarbonate down an average of 2 cents, according to market sources contacted by PN.

Attempts by producers to raise prices in that period were unsuccessful, as demand growth was slow and material was readily available.

"Some end markets were seeing more demand, but we also were seeing deals on rail cars for some materials," one source said.

The fourth-quarter declines continued a pattern of price erosion that had started earlier in the year. Nylon and PC prices each had dropped 2 cents total in July and August. Nylon 6 prices also had been down 10 cents in total in May and June, with nylon 6/6 prices down 13 cents in those two months. PC prices declined an average of 6 cents in May and June.

The source added that inventory corrections also played a role in second-half price drops for nylon and PC. Many processors found themselves with more material than they needed, having placed additional orders amid the shipping chaos of 2020 and 2021. Those challenges were caused by the COVID-19 pandemic and by the ice storm that hit Texas in early 2021, affecting plastics and chemical manufacturing for most of the year.

Inventory challenges should play a lesser role in 2024, the source said, adding that "it feels like we're getting back to normal."

In the recycled resin market, clear post-consumer PET resin prices increased by 6 cents and green post-consumer pellets were up by 4 cents in the fourth quarter.

"Most people are pre-buying for April, May and June right now, so you are seeing an uptake on demand," one source told PN.

Recycled PET prices fell in the first half of 2023 and started to increase in the second half of the year. Prices for 2024 are expected to continue to rise through the next couple of months.

In feedstocks, West Texas Intermediate oil prices opened December near $76 per barrel but fell 6 percent to less than $72 by the end of the month. From that point, prices bounced up 8 percent to close at $71.65 on Jan. 25.

Markets for natural gas — used as a feedstock to make PE and PVC — started December at $2.80 per million British thermal units but dropped 10 percent to $2.51 by the end of the month. From that point, the Texas cold snap sent prices up as high as $3.31 on Jan. 12 before they receded again, closing at $2.64 on Jan. 24 — up a net of 5 percent so far for the month.