In January 2016 the North American commodity resin prices have been active, with rising polypropylene prices and declining polyethylene and PVC prices. The regional supplies of PP have remained tight, due to which since Jan. 1. there has been a 3-cent-per-pound price hike, which is half of the originally announced by suppliers move by 6-cent. The prices are expected to increase with the remaining 3 cents in February.

January’s increase in PP prices marks the fourth month in a row for increasing PP prices in North America. Combined all the increases have risen the prices up to an average of 10 cents per pound.

polypropylene prices article 3On Jan. 18 Ineos Olefins & Polymers USA have announced force majeure production limits on copolymer PP produced at the Chocolate Bayou plant in Alvin, Texas. According to industry experts, due to an equipment failure, the output at the site – with a nearly 1 billion pounds of annual PP capacity – will be limited until mid-February.

According to our source article on the topic in Plastic News, market analyst Phil Karig has stated in an email correspondence that “with the lack of new PP capacity and incremental resin demand growth, PP capacity utilization has creeped up to the point where PP producers have been able to move into a seller’s market and increase their margins over monomer drastically over the last year and a half”.

Karig has further added, that “PP producers were really able to demonstrate their pricing power in January by increasing PP prices even as crude oil prices plummeted. […] Looking forward, there is no substantial new PP capacity other than plant de-bottlenecking that is scheduled to come on line anytime soon. Substantial pricing power will remain in PP sellers’ hands for the foreseeable future.”

According to Karig – managing director with Mathelin Bay Associates in St. Louis – this ongoing tightness might lead North American processors to look outside of the region to meet their PP needs.

polypropylene prices article“The fastest way for PP processors to reduce their costs is to locate and source imported PP when they can find it,” Karig has said. “PP prices in the Mideast, including Turkey and Israel, are currently as much as 25 cents or more lower than in the U.S. The gap between the U.S. and the rest of the world is large enough to offset the costs of freight and duty as well as the hassles of extended shipping times and having to take deliveries in 1-ton bags rather than in bulk.”

According to the American Chemistry Council in Washington, North American PP sales grew 5.3 percent in 2015 to more than 17.2 billion pounds. A drop of almost 23 percent in export sales has somewhat managed to temper the domestic market growth of 6.3 percent.

Some regional PP end markets have exceeded that 6.3 percent growth average and sales into injection molded housewares have jumped 12.2 percent, while PP sales into sheet have soared 13.6 percent and PP sales into oriented film have gone up 7.3 percent.

Polyethylene prices slide

Since Jan. 1, driven lower by plunging global oil prices, the PE prices have fallen an average of 3 cents per pound. In recent weeks, only 18 months after being above the $100 mark, crude oil prices have been below $30 per barrel. Oil prices remain the price-setter for PE on global basis, although in most North American PE natural gas is used as a feedstock.

The PE price drop in January was the end of a three-month period of flat prices for the material. According to PE market analyst Mike Burns (from Resin Technology Inc. in Fort Worth, Texas), with oil under $30, there might be more PE price drops seen in February. He also added that regional PE prices remain competitive vs. imported material.

In recent months regional PE makers have been trying to increase the prices an average of 5 cents per pound, but some suppliers have put that attempt on hold. According to ACC, during October, U.S./Canadian sales of high density PE have gone up with 6.6 percent. Domestic sales have gone up only 1 percent for that period, whereas export sales have rocketed up with almost 42 percent. A 7 percent growing domestic bright spot has been provided by sales of HDPE into household chemical bottles.

The regional sales of low density PE in October have improved with 3.3 percent – the domestic growth of almost 4 percent has been lessened by a growth of only 1.2 percent in export market.

Regional sales of low density PE through October improved 3.3 percent, with domestic growth of almost 4 percent lessened somewhat by growth of only 1.2 percent in export markets. Sales of low density PE into the non-food packaging film have risen more than 11 percent during the 10-month period.

polypropylene prices article 2For linear low density PE, 10-month sales have grown 6.3 percent. Domestic sales growth of almost 6 percent has been augmented by a 9 percent rise in the export sales. Sales of linear low density PE into all types of film (packaging and non-packaging) have jumped almost 8 percent in that period.

The low price of natural gas has caused a boom in the construction of new PE units. Reportedly by the Plasti News article, the Braskem Idesa joint venture has recently started producing at a new unit in Mexico, while Nova Chemicals is about to launch a new line in Joffre, Alberta by the end of this year. Also by the end of the year four billion pounds of capacity could be added in the region, with as much as 34 billion pounds being added through 2020.

According to Karig “the wave of new PE capacity is starting to hit the market. The new PE producers are looking to gain share while current PE producers are scrambling to make sure that they don’t lose market share. As we move through 2016 and into 2017 the fight for market share is likely to intensify — and the market-wide price reduction in January … are the first skirmishes in the fight for market share,” he has further added.

PVC Prices Decline

Resulting again from the low oil prices and the weak seasonal demand, the prices for North American PVC has decreased with an average of 1 cent per pound. In November and December last year the prices for the material had been flat.

With sales declining 1.9 percent to just over 14.7 billion pounds (according to ACC), the PVC makers in the US and Canada have had a challenging 2015. The decline of only 1.5 percent in export sales had softened the domestic sales drop of 2.1 percent.

For the 2015 US/Canadian PVC sales a big role was played by the lower-than-expected US construction market growth. Almost 62 percent of domestic PVC sales in 2015 have been generated by construction-related uses.

Almost one percent demand slide had been experienced by the rigid pipe and tubing end market, which in 2015 had occupied a 45 percent share of domestic sales. It was sufficient to counter most of the 2015 PVC volume growth of siding and related uses (up with 5.6 percent), fencing and decking (up with 3.4 percent) and extruded windows and doors (up with 1.8 percent).

Article and images source: Plastic News