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Rising Prices for PE, PVC; Others Flat to Down

The trajectory of prices of the five volume commodity PVC resin powder was upward through September; but starting last month, a reversal was underway for most of these resins, possibly excepting PE and PVC. Factors in the continued flat-to-downward trajectory for PP, PS and PET included expectations of improved supply availability, lower feedstock prices, slowed seasonal demand, and loss of export opportunities due to higher prices. Factors maintaining strong pricing for PE and PVC, at least in the short term, included strong demand and tight monomer and polymer supplies brought on by planned and unplanned production shutdowns.

These are the views of purchasing consultants from calcium carbide method pvc resin, Inc. (RTi), senior editors from PetroChemWire (PCW), and CEO Michael Greenberg of The Plastics Exchange.

Polyethylene prices moved up 5¢/lb in September, capping the fourth consecutive month of price hikes, bringing the total to an unprecedented 19¢/lb. Suppliers also came out with a fifth increase—another 5¢/lb—for October, owing primarily to continued strong demand and tight supplies, made tighter following precautionary shutdowns for Hurricane Laura in late August.

Mike Burns, RTi’s v.p. of PE markets, held that PE prices would stay firm, with the October hike—if not implemented right away—hanging over discussions with customers for the remainder of the year, due to sustained demand and tight inventories. PCW’s senior editor David Barry said he would not be surprised if suppliers stuck to their increases, but expected processors would have better leverage this month and in December in the negotiation of 2021 contracts. With the exception of HDPE blow molding grades, where a real shortage occurred, processors were able to get what they needed, but went through it faster than anticipated, noted Burns.

PE Price Trends November 2020

Both Burns and Barry ventured that a slow recovery of tight suspension method pvc resin inventories was already underway at the start of the fourth quarter, which ought to help ease price pressure in first quarter of 2021. Going into October, The Plastic Exchange’s Greenberg reported that while demand for spot PE had been good, processors generally opted for just single truckloads, and a whisper of uncertainty had crept into the market. “The fourth quarter often brings softer demand and could provide the market an opportunity to rebalance especially when downed plants return fully online and new reactors begin production,” he commented.

PP Prices Up, Then Flat to Down

Polypropylene prices moved up 3¢/lb in September, despite stability in propylene monomer contract prices, which remained at August’s 36¢/lb level. Moreover, PP suppliers announced another 3¢/lb “profit-margin increase” for October, a move that looked to be at least partially successful due to tight supply and some rebound in domestic demand, according to Scott Newell, RTi’s v.p. of PP markets, as well as PCW’s Barry, and The Plastic Exchange’s Greenberg. All three saw the recent upward trajectory halting, if not reversing.

Newell ventured that suppliers’ attempted margin expansions in September and October would erode between mid-month and December. “Suppliers have had leverage all this time owing to unplanned and planned monomer and PP outages, and low capacity utilization overall (around 83%). But the longer buyers can wait to order for 2021, the better. I expect quite a few pounds of PP and monomer capacity to be brought on stream in that time frame.”

PCW’s Barry reported that while suppliers were seeking to boost their margins further in October, there were already signs that high PP prices were crimping demand for price-sensitive products such as PP tubs and totes, which depend heavily on “big-box” retail channels. He cited factors such as slower demand, rising PP imports and improving operating rates in the fourth quarter that could bring a turnabout in the PP supply situation in late November into December.

Reporting that spot PP demand was strong, supply was scarce, and prices were holding steady, Greenberg noted, “Our outlook has been moving from bullish back towards neutral as we feel there is some froth in spot pricing; still, industry inventories are at a historically low level and need to be rebuilt from a deep trough.”

PS Prices Flat to Down

Polystyrene prices were flat in September and expected to be flat in October, with downward pricing pressure mounting this month. After July/August hikes totaled 5¢/lb, Robin Chesshier, RTi’s v.p. of PE, PS and nylon 6 markets, predicted that lower prices are in the offing, perhaps dipping 1-3¢/lb before year’s end. Chesshier cited poor domestic demand, which never rebounded after the 12¢/lb decrease in April/May, along with falling prices of feedstocks.

PCW’s Barry reported that PS prime market prices were stable going into October with the trajectory a bit unclear. He ventured that the market could hold steady through fourth quarter based on the lack of significant feedstock cost pressures. The implied styrene cost based on a 30/70 ratio of spot ethylene/benzene was at 19.75¢/lb, down slightly from 21.1¢/lb at September’s end. Spot PS prices were mostly steady. He also noted that continued demand for styrene monomer exports could support a price hike for PS before year’s end, but slow seasonal domestic demand for PS would work against such a move.

PVC Prices Up

PVC tabs in September moved up by 5¢/lb, the result of an initial 3¢ hike increase and a 5¢ hike announced later in the same month. Suppliers also issued a 4¢/lb October increase, though both PCW senior editor Donna Todd and Mark Kallman, RTi’s v.p. of PVC and engineering pvc paste resin, doubted its full implementation. Still, these sources anticipated that the remaining 3¢ of the second September increase would eventually take hold. “I think the 4¢/lb price hike might be a stretch. Still, suppliers have leverage,” said Kallman. He cited a very tight market, a robust increase in demand from construction, significantly higher export prices, much lower availability, and the late-settling September ethylene contract price increase of 3.5¢/lb, which added 1.6¢/lb to the cost of producing PVC. Kallman expected that November would see significant recovery in PVC supply, and prices could be flat for the remainder of the year.

PCW’s Todd reported that PVC production remained problematic for three of the four main suppliers, with Shintech the only one operating at full rates at the start of October. Westlake’s Lake Charles, La., site had regained electricity following a Hurricane Laura outage, but market watchers thought it would take the entire month for the company to build enough PVC inventory to rescind its force majeure declaration. Formosa cited unexpected difficulties at its Point Comfort, Texas, plant that interfered with production of its specialty PVC. Formosa declared force majeure in early October, and also cited an upcoming government-mandated 30-day shutdown of the plant in the near future. Oxy was allocating resin to its customers, due to feedstock production difficulties at Pasadena, Texas.

PET Prices Down

PET monthly contract business started October at 45-48¢/lb for railcars delivered U.S. Midwest and South—steady from early September. Prices were expected to fall 2¢ to 5¢ this month as overall demand for PET bottles and containers sags during the colder weather, according to PCW senior editor Xavier Cronin.

At the same time, demand for PET bottles and containers related to the COVID-19 pandemic remains strong. This is due to purchases of bottled water and carbonated soft drinks at retail outlets and by governments and non-profit agencies for emergency use and other needs, like supplying water to essential workers.

Prices of PE and PP moved up in double-digits, while those of PS, PVC and PET were also on an upward trajectory, in the first six weeks of this year. The remainder of the first quarter was projected to continue on this track, owing to global constraints on feedstocks and some resins, coupled by continued strong demand in most cases. Those are the views of purchasing consultants from plasticizer, senior editors from PetroChemWire (PCW,), and CEO Michael Greenberg of The Plastics Exchange.

Polyethylene prices rose 6¢/lb following the December 5¢ increase, and suppliers announced a 7¢ increase for February, according to Mike Burns, RTi’s vp of PE markets, PCW senior editor David Barry, and The Plastic Exchange’s Michael Greenberg. Said Burns, “Prices are now 30¢/lb higher than they were in December 2019, without any significant cost increases to produce polyethylene.”

These sources anticipated that the past month’s 7¢ increase had strong potential of being implemented, attributing the increases to tight inventories that have resulted from both planned and unplanned shutdowns and strong domestic and export demand, particularly to Latin America and Mexico. Supply is especially tight for HPDE and LDPE, due to the outage of Braskem Idesa’s large Mexican plant, explained Barry. While the plant was back up and running at 15% of capacity, it was unlikely to make a difference in the supply shortage until April.

Meanwhile, prices of spot PE were at prime material levels. Burns predicted that demand will be strong through the first quarter and perhaps into second quarter, while supply will remain tight; and he did not expect much price relief till the second half of the year. PCW’s Barry noted that some processors who had bought heavily during December and January were positioned to cut back on orders last month and perhaps into this one. Spot availability was limited in the domestic resale market, and most offers were being quoted with the 7¢/lb February increase and a rollback provision.

Going into the second week of February, Greenberg characterized spot resin trading as hyperactive. “Processors, many on supply allocation, have flocked to the spot market as they scramble to procure material. This has resulted in very high volumes of resin changing hands through our trading desk and buyers’ resilience continued to astonish even as prices spiraled ever upward.” He noted that spot gains so far this year were 11¢ to 19¢/lb, depending on scarcity of the grade.

PP Prices Climb Farther

Polypropylene prices moved up 12¢/lb in January, in step with propylene monomer, which settled at 60.5¢/lb. Yet another double-digit increase was expected for the monomer last month, along with a 6¢/lb margin increase sought by PP suppliers, according to Scott Newell, RTi’s vp of PP markets and PCW’s Barry. Newell expected that suppliers would succeed with the margin increase. Barry also reported that LyondellBasell issued a 6¢/lb hike for March, in addition to any change in the monomer.

Newell, Barry and Greenberg all noted that these increases are primarily feedstock driven. Newell ventured that the monomer tightness would continue, as inventories had yet to be rebuilt following several outages in the last half of 2020. Despite very strong current PP demand, all three sources expected demand destruction to follow, though it has not occured to the degree originally thought. “We’re seeing increasing imports of propylene, PP pellets and finished goods like BOPP film,” Newell said. “Imported PP is priced better than domestic resin, even with the higher freight costs.” Barry noted that the spread between U.S. and Asian market pricing was approaching 40¢/lb.
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