Commodity resin prices are moving up gradually, if not as fast as suppliers wish. Low domestic demand and soft monomer prices restrain hikes, but revived exports and tight monomer supplies could change the picture.
Polyethylene prices remained unchanged through April and into early May. Suppliers rescinded their 5¢/lb March hikes but then called for a 3¢ increase for May 1, and at least one added 2¢ more for June 1. However, the London Metal Exchange (LME) North American short-term futures contract in blown-film butene LLDPE pointed in the opposite direction—37¢/lb for June, down from 38¢ for May.
Contributing factors: Polyethylene supply is said to be tight, owing to suppliers restraining production and an uptick in exports. “Suppliers did not increase production to meet that export demand,” says senior editor Mark Quinner at PetroChem Wire in Houston. According to Mike Burns, global business director for PE at Resin Technology Inc. (RTI), Fort Worth, Texas, resin capacity utilization rates have been under 70%. He also notes that while the export market rose 25% in March, PE resin inventories continued to grow. “This is an indication of how very poor domestic demand still is.” LyondellBasell plans to close another 480 million lb of HDPE capacity at Alvin, Texas, by July 31.
In the first week of May, ethylene monomer spot prices dropped to 21¢/lb from a high of 25¢ in mid-April. Contract prices in March and April fell a total of 1.5¢/lb. However, ethane prices have been going up, while ethylene prices have been dropping. “As ethylene suppliers approach zero profit margins, you can expect them to significantly reduce production. This will tighten the market and ethylene prices may start increasing,” says Burns.
Polypropylene prices remained flat through April. The 2¢ to 3¢/lb price hikes for that month failed, but suppliers tried again with 3¢ increases for May 1. LME’s North American short-term futures contract in g-p injection-grade homopolymer for June was 37¢/lb, almost unchanged from May’s 37.2¢.
Contributing factors: “We are seeing something we haven’t seen for the last couple of years—relative price stability as opposed to big swings in price movement,” says Scott Newell, director of client services for PP at RTI. Export demand awakened in March and continued into April, allowing suppliers to get rid of excess resin. According to Newell, suppliers’ inventories are low and the market has tightened, although he says no one has difficulty getting resin when they need it. Domestic demand remains very poor. First quarter demand was off by 15% from last year.
Meanwhile, propylene monomer supplies are tight as refineries and steam crackers have been running at low rates. Low monomer supply was felt even more by early May, when contract prices were expected to settle 2.5¢/lb higher. Newell says tight monomer supply could continue into June and advises resin buyers to expect price increases. He predicts that suppliers will be able to get at least 2¢ of their newest 3¢ hike.
PVC HIKE FOR JUNE
PVC resin producers in mid-May all announced a 3¢/lb increase for June 1, except Westlake. Demand is still very weak. Ethylene feedstock prices are steady. So the market expects an increase of only 2¢ in May and 1¢ to 2¢ in June.
Polystyrene producers pushed for a 4¢/lb hike in May, but they are expected to fall back to about 2¢. Resin makers’ announcement of a further 3¢ increase June 1 was greeted with some skepticism. Meanwhile, EPS producers are supporting 5¢/lb increases for May and 5¢ more for June.
Contributing factors: PS price increases were based on an expected surge in benzene tabs in April, which didn’t happen. Instead benzene was flat at $1.69/gal and settled for May at $1.90. That justifies only a 2¢ increase in PS. Depending on where benzene goes next, the June increase could disappear too. Imports of lower priced EPS beads from Asia have tapered off, making EPS hikes likelier.
Bottle-grade PET resin prices are expected to rise at least 5¢ this month. PET suppliers issued May 1 increases of 4¢ and quickly amended them to 6¢/lb.
Contributing factors: A rapid increase in the price of paraxylene feedstock caused PET suppliers to adjust their May increases higher. Paraxylene prices moved from 44¢/lb in April to 49.5¢ in May, and June price nominations were at for 51.5¢/lb. According to one major PET supplier, this upswing stems from increased PET resin and fiber demand in Asia, low production of paraxylene because of the economic slump, and the recent rise in crude oil prices, which are up $8/barrel.
This supplier expects the new PET resin price increase to be mostly successful: “Major PET bottle converters have already announced to their customers price increases of 5¢/lb for June 1. I expect that PET resin suppliers will at least get 5¢ of their 6¢/lb increases.” This source also notes that this is the first year in quite some time when there is no apparent buildup of bottle resin inventory. “There was a colder, wetter spring. The economy is slow. And no one wants to build inventory while prices of raw materials are high and there are indications that they may soon drop.”
Meanwhile, 800 to 900 million lb of new capacity from Indorama Polymers at its AlphaPet venture in Decatur, Ala., is expected to start up in June. This will start affecting the market in July.
Attempted increases in engineering resins and thermosets remain in question because of lack of industry support. Dow announced a 7¢/lb hike for PC in May, despite the fact that PC demand is weak globally. “The world is awash in PC,” says to Paul Blanchard at CMAI in Houston. Dow justified the hike on the basis of feedstock price increases.
In nylon, Honeywell Resins and Chemicals announced a 10¢/lb increase in nylon 6 resins for May 11, but no other supplier had followed suit by mid-May.
Likewise, AOC said it would hike tabs on unsaturated polyester resins and gel coats by 5¢ on June 1. Other suppliers said they were not going along.
|Market Prices Effective Mid-May A|
|RESIN GRADEb||¢/LB||¢/CU INc|
KEY: Colored areas indicate pricing activity. An arrow () indicates direction of price change. aTruckload, unless otherwise specified. bUnfilled, natural color, unless otherwise specified. cBased on typical or average density. dNot applicable. eNovolac and anhydride grades for coils, bushings, transformers. fNovolac and anhydride grades for resisitors, capacitors, diodes. gIn quantities of 20,000 lb. h19,800-lb load. jLME 30-day futures contract for lots of 54,564 lb..