Moving Toward Third Quarter, Prices of All Volume Commodity Resins Appear to Have Bottomed Out

As we approach the third quarter, prices of all nine volume commodity resins appeared to have bottomed out generally. Still, there might be some further downward pressure for resins such as PS, nylon 6 and PET, while there is upward pressure for PE and possibly PVC with the return of the Chinese export market along with higher feedstock costs.

Here’s a look at how our industry colleagues with pricing expertise view things for each of these commodity volume resins. They include 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 remained unchanged in May, following the 4¢/lb drop in April, but suppliers were out with a 4¢/lb increase for June. Spot market prices moved up by mid-May due to tight availability and a strong exports market to China, according to Mike Burns, RTi’s v.p. of PE markets; PCW’s senior editor David Barry; and The Plastic Exchange’s Michael Greenberg.

Both Burns and Greenberg ventured that the increase had some potential to go through in June. PCW’s Barry did not see it as a “slam dunk”, noting that a partial increase and only for some grades was more likely, but ventured that another increase would surface for this month. He confirmed that spot prices were closing the gap with prime material—now at 6 to 7¢/lb vs. a more typical 8 to 10¢/lb. Both Barry and Burns attribute the tightness partially to suppliers “quietly” slowing down production. Greenberg, who expected spot prices to move up by the second week of June, characterized spot activity this way: “Some who sensed the upward price momentum bought extra resin fearing that this would be their last chance at these stellar prices, while others, still reeling from demand loss, decided to wait not because of price, but rather uncertainty regarding future business.”

Burns said domestic demand for essential PE products got even stronger in May, and non-essential products started to pick up faster than might have been expected. Still, he characterized this as “recovery demand”.  “June will be an interesting month. Quirky things can take place within a 30-day period. It will depend on whether we see an uptick of coronavirus cases and where.” Moreover, both he and PCW’s Barry cited NOAA’s Climate Prediction Center that expects an above-normal (60%) 2020 Atlantic hurricane season—June 1-Nov. 30.

PP: Prices in May were flat, in step with propylene monomer contacts, and were expected to follow the monomer in June and July—flat or 1¢/lb give or take, according to Scott Newell, RTi’s v.p. of PP markets,  PCW’s Barry, and The Plastic Exchange’s Greenberg. They cited improved availability and demand in the spot market with attractive pricing.

“The PP market relies on the domestic market for the vast majority of sales, quite different than PE, which exports some 40% of production. With so many processing facilities temporarily shut, the PP market has struggled during the pandemic period and April sales were the lowest since Feb 2018,” reported Greenberg.

According to these sources, suppliers had reduced production rates and going into June were at 80% or lower. They also project a gradual ramp up taking place through the summer. Although by early June, automotive and other durable goods manufacturing was starting to come back, Newell noted, “We’re still about 30% below plan. There is a lot of uncertainty across the supply chain in the ‘non-essential’ products area, including staffing shifts.”

PS: Prices dropped 3¢/lb in May, following the 9¢/lb decrease in April, as benzene prices dropped from $1.21/gal to 95¢/gal. While PCW’s Barry ventured prices in June, and possibly July, would be flat, Robin Chesshier, RTi’s  v.p. of PE, PS and nylon 6 markets, ventured that another price drop of 1 to 2¢/lb was likely as processors would seek further price concessions. She noted that within the April to June timeframe, prices of all PS feedstocks had dropped between 17 to 20¢/lb, while suppliers had reduced prices by only 12¢/lb.

Both sources ventured that a price hike was likely to surface in July, with suppliers citing an uptick in costs of raw materials—primarily ethylene and benzene, along with some modest recovery. The implied styrene cost based on a 30/70 ratio of spot ethylene/ benzene was at 12.8¢/lb in early June, up 1.1¢/lb over the previous four weeks.

PVC: Prices dropped 5¢/lb in April, and it was generally expected that they would drop by another 2 to 3¢/lb in May, according to both Mark Kallman, RTi’s v.p. of PVC and engineering resins and PCW Senior Editor Donna Todd. Meanwhile, suppliers issued a 3¢/lb for June, and soon after another 3¢/lb for July. Demand for the major construction sector had dropped by more than 30% going into June, while medical, e-commerce and retail sectors held up relatively well, according to Kallman. He ventured that suppliers would likely succeed in pushing through the July increase. He noted that suppliers had cut back on production, while at the same time the exports market had strengthened and ethylene prices were moving up.

Late-settling May ethylene contract prices moved up 3.5¢/lb which represents an increase in the cost to produce PVC of about 1.68¢/lb, reported Todd. She also noted that about 30% of domestic PVC production goes to exports, whose prices have substantially moved up. Combined, those two factors potentially can impact domestic prices. As such, it remained to be seen whether suppliers would succeed in implementing the 6¢/lb increases that were on the table.

PET:  Prices stagnated by the end of May in the low 40¢/lb range due to an oversupply of imports and robust domestic production, according to PCW Senior Editor Xavier Cronin. By the first week of June, some off-grade spot resin was selling in the high 30¢/lb range. Typically, lower-priced PET can be found on the U.S. West Coast where many imports from Asia land, noted Cronin.

Prices for domestic prime resin was expected to be steady in the low 40¢/lb range for railcars (190,000 lb) delivered to the Midwest and South. Said Cronin, “Traditionally, PET prices peak for the year in July during the period of heavy bottled beverage and water consumption. But with the COVID-19 situation keeping beach crowds to a minimum, demand is expected to be weak compared to July 2019.” He ventured that July PET prices would be flat if not down.

ABS: Prices of ABS between first quarter and end of May dropped between 5 to 10¢/lb due to a drop in demand during the coronavirus “lockdown” and well-priced imports, according to RTi’s Kallman. ABS prices were likely to remain flat through the June-July timeframe. Said Kallman, “The ABS market is at the bottom. When feedstock prices start moving up, we’ll see an upwards movement, but we’re two-to-three months away from that.” He expected a slow recovery to gradually take place in the automotive, appliance and electronics sectors for this globally well-supplied market.

PC: Prices dropped by at least 5¢/lb to 10¢/lb through much of second quarter. RTi’s Kallman ventured that PC prices would be flat-to-down in the June-July timeframe. “The overall market is reaching the bottom. Feedstock prices have dropped and suppliers have reduced production output due to the slowdown in automotive and construction sectors,” said Kallman. The one “bright spot” has been the PC sheet business due to strong demand for clear separation barriers, face shields and other medical applications, though that business has not been enough to offset the downward demand from the major market sectors.

Nylon 6: Prices dropped by 5¢/lb in April, following the historic drop in benzene prices along with lower prices of all key feedstocks. RTi’s Chesshier expected May prices to drop by another 5¢/lb, followed by relatively flat pricing in the June-July timeframe. She expected that prices are likely to stabilize in late third quarter as automotive, carpet and textile market sectors start ramping up. Even if demand improves, suppliers will not be able to raise prices in this well-supplied market, Chesshier ventured.

Nylon 66: Prices of nylon 66 dropped 5¢/lb to 10¢/lb through May. RTi’s Kallman ventured that prices would be flat-to-down in the June-July timeframe. Nylon 66 suppliers have been throttling back production by as much as 50% in some cases owing to the drop in demand particularly from the automotive sector. Kallman expected a slow recovery with suppliers starting to slowly increase production output.