Higher Prices for Commodity Resins, Except PP

A combination of higher feedstock prices, strong demand and the impact of tariffs drove prices of PE, PS, PVC and PET upward at the end of the third quarter, though PP prices dropped slightly. Overall projections for this month and next were for flat pricing with potential for a slight uptick in the case of PVC, PET, and PP.

These were the views last month of purchasing consultants from Resin Technology Inc. (RTi), Fort Worth, Texas; senior editors from Houston-based PetroChemWire; and CEO Michael Greenberg of the Plastics Exchange in Chicago.

PE PRICES UP, THEN FLAT

Polyethylene prices moved up 3¢/lb in September, and suppliers were seeking additional 2-4¢/lb price hikes in October, though the latter may have no legs, according to Mike Burns, RTi’s v.p. of PE markets, and PCW senior editor David Barry. Said Burns, “The 3¢/lb implemented was a demand-driven increase, with tariffs on China having on impact on any company that ships out anything using stretch-wrap film, garbage and grocery bags, etc.” He noted that big-box retail stores cannot call China for film products, as that country cannot compete without cheap U.S. resin. As a result, many domestic processors of PE film—accounting for nearly 65% of the PE market—issued price increases of 4%, citing both strong demand and higher feedstock (ethylene) prices. “I expect this demand to continue through the rest of the year—many large processors are outsourcing,” he commented.

Both Burns and Barry ventured that PE prices for the remainder of the year would be flat. Said Barry, “I don’t believe PE supplier inventories will be sufficiently reduced, while processors also aim to manage inventories in the last two months of the year. And the market fundamentals are not there to support further increases. The exception might be if Brent crude oil rose up to $90/barrel from $80/bbl.” Burns saw potential for processors negotiating lower PE contract prices as they move into 2019.

The Plastics Exchange’s Greenberg saw above-average activity and higher prices in the spot PE market last month—HDPE injection grades rose 1.5¢/lb and L/LLDPE film grades moved about 1¢ higher by the first week of October. He noted that the surge of buying had begun several weeks previously due to deeply discounted prices. “Even as the lowest prime offers had been scooped up, buyers were not deterred by fresh offers priced a penny or two higher.”

PP PRICES DOWN, THEN FLAT?

Polypropylene prices dropped 1¢/lb in September, in step with propylene monomer, and expectations for October through December were for fairly flat pricing, according to Scott Newell, RTi’s v.p. of PP markets, as well as PCW’s Barry and the Plastic Exchange’s Greenberg. The latter reported, “We currently expect little change in October PP contracts, perhaps a penny softer. Spot PP prices dropped a penny following lower monomer spot prices, but rapidly returned to flat pricing due to the lack of well-priced spot PP.” According to Newell, the PP market is so tightly balanced that prices could move slightly down or even up.

Monomer production issues, particularly related to the new Enterprise and Dow on-purpose propylene plants, have continued due to harsh operating conditions—higher temperatures and catalyst sensitivity that make them harder to operate, according to Barry. He added, “PP suppliers are constrained because of tight propylene. The outlook for pricing is not going to change much, as domestic PP prices are the highest the world. We will keep seeing more imported PP resin and PP finished goods. So far, it hasn’t made much difference to PP resin prices due to both planned and unplanned outages.”

Both Barry and Newell projected a continued tight PP market into next year due to monomer constraints. Said Newell, “Import volumes have increased, a sign of demand destruction as processors aim to secure additional material from other sources.” Greenberg reported that the continued flow of imports, which can be 100 million lb/month or more, has helped to fill the gaps, especially as production disruptions have impacted the already tight supplies.

PS PRICES UP, THEN FLAT TO DOWN

Polystyrene prices moved up 2¢/lb in September, driven by rising feedstock costs, but the projected trajectory was for generally flat pricing in October and this month, according to both Robin Chesshier, RTi’s v.p. of PE, PS and nylon 6 markets, and PCW’s Barry.

Both sources noted that while some September ethylene contract settlements of 33.75¢/lb—up 5¢ from August—were one factor, benzene contract prices went up only 10¢/gal. Benzene accounts for 70% of PS production cost, Barry pointed out. Adds Chesshier, “There ought not to have been any increase based on feedstock costs. Polystyrene suppliers were asking for 4¢/lb when their cost increased only 1¢/lb.” She expected that prices this month could be pressured downward if feedstock costs remain flat or drop along with seasonally slowed PS demand. Barry added that while there is some potential for a PS price hike if crude-oil prices spike upward, benzene prices have not been following oil prices lately.

PVC PRICES FLAT TO HIGHER

PVC prices continued flat through September, but suppliers issued a 2¢/lb increase for Oct. 1, a move attributed in part to a September ethylene contract price hike of 5¢/lb. Mark Kallman, RTi’s v.p. of PVC and engineering resin markets, thought the increase could be strongly challenged by processors, due to lower export prices, and predicted that October PVC prices would be flat to 1¢ higher. Another price increase for November was emerging, according to PCW senior editor Donna Todd.

Todd reported that PVC suppliers had absorbed three other ethylene contract price hikes since May—bringing the total increases to 7.75¢/lb, which would imply an increase in PVC production costs of 3.72¢/lb. “This gives suppliers the incentive to try for another increase of about 2¢/lb, but a price hike in November would face even stiffer headwinds than one in October,” she reported. Both Kallman and Todd noted that resin buyers typically expect prices to ease going into the fourth quarter. Kallman said that while there are some PVC plant maintenance shutdowns scheduled for the fourth quarter, improved feedstock costs, domestic seasonal slowdown, and continued softer global demand are likely to keep the market relatively balanced. Todd also noted that with the exception of PVC pipe producers, converters in most market segments would not be able to recoup fourth-quarter price hikes, and lackluster demand and plunging PVC export prices should preclude further attempts to raise prices.

 

PET PRICES FLAT TO HIGHER

Prices for domestic bottle-grade PET ended September unchanged from August at around 80¢/lb for truckloads and bulk trucks on a delivered basis to customers on the East and West Coasts, and in the mid-80¢/lb range delivered to Midwest locations, according to PCW editor Xavier Cronin. Imported PET remained plentiful, with prices largely at parity with domestic PET, though somewhat higher for inland delivery.

Cronin expected that October prices would likely rise a penny or two, driven by strong demand from the bottle and packaging sector. He ventured that November prices would ease down by 3-4¢/lb, based on estimates from supplier sources on the seasonal slowdown of consumption of carbonated soft drinks and other beverages sold in single-use plastic bottles.