Commodity resin prices were still rising last month, and still more hikes were pending, but market resistance was building. The reasons were continued soft demand, slowing exports, and—most critical—slipping monomer and feedstock prices. Futures prices for PE and PP dropped significantly.
Polyethylene prices moved up 7¢/lb as suppliers fully implemented their July increases. This brought the total increase in PE prices this year to 18¢/lb. Further hikes not yet implemented at press time included 8¢ effective Aug. 1 and 5¢ for Sept. 1. Meanwhile, the London Metal Exchange (LME) North American short-term futures contract for September in blown film butene LLDPE was 75¢/lb, down from August’s 79.5¢/lb.
Contributing factors: A drop in oil prices brought signs of weakness in ethylene monomer tabs. Contract prices for ethylene saw a 5¢/lb increase for June and 4¢ more for July. But spot ethylene prices have dropped steadily. By early August, nearly 30¢ differential emerged between contract prices and spot prices as low as 45¢/lb. This should lead to lower contract prices, said Mike Burns, global business director for PE at resin purchasing consultant Resin Technology, Inc. (RTI), Fort Worth, Texas.
On the other hand, PE resin supply has been tight despite slack domestic demand. While domestic sales through June 2008 were down 5.5%, total sales were down less than 1%, thanks to strong exports. But by mid-August, global demand was starting to soften. Said RTI’s Burns, “I think the 8¢ August PE increase will be pushed back to September unless there is a spike in oil and ethylene prices.” A major PE supplier replies, “Global export demand has softened, but we expect China will be back in the game after the Olympics.”
Polypropylene prices moved up 11¢/lb in July, in partial implementation of announced hikes of 17¢, which included a 2¢ surcharge for transportation and utility costs. Total increases in 2008 through July come to 26¢/lb, out of overall increases of 45¢ since Jan. 2007. Meanwhile, a new 6¢ increase was announced for Aug. 1. The LME North American short-term futures contract for g-p injection-grade homopolymer in September was 77¢/lb, down from August’s startling 91.2¢.
Contributing factors: A gradual shift in market conditions is starting to favor PP buyers, according to Scott Newell, director of client services for PP at RTI. Not only is overall demand (domestic and export) down 6% to 7% through June, but resin supply appears looser. Most industry sources see little chance that the latest 6¢ hike will take effect. Says one source, “We are starting to see resin suppliers courting processors and deals trading at lower prices.”
The explanation is the recent dip in propylene monomer prices. Propylene supply is no longer as tight, spot prices have come down by as much as 10¢/lb, and contract prices are likely to follow. Newell expected monomer prices to be flat or down 2¢ to 3¢ in August. But September may see a sizeable drop, following the spot market trend, he said.
PET prices moved up nearly 7¢/lb as suppliers implemented their July hikes. This brought the total increases this year to 15¢ to 17¢/lb. Price increases of 7¢ to 10¢ were pending from Aug. 1.
Contributing factors: Recent drops in feedstock and energy costs won’t help resin suppliers’ push for higher prices. Global prices of paraxylene, PTA, and ethylene glycol precursors all dropped significantly by the end of July, explains Michael Dewsbury, PET global business director at RTI. If anything, says Dewsbury, PET tabs could drop 5¢ to 10¢/lb.
PVC resin producers sent letters to customers in mid-August implementing 4¢ of the 8¢ increase announced for July 1, and stating that the other 4¢ would be effective Aug. 1. There appeared to be little resistance to the first 4¢, but there was opposition to the second. As one processor noted, “Every railcar is being negotiated.” Processors don’t expect the second 4¢ to stick.
Contributing factors: Spot ethylene was below 60¢/lb in mid-August while contract monomer was 75.5¢ and expected to drop a nickel. Demand was also softening.
Defying gravity, PS producers asked for a 4¢ increase on both GPPS and HIPS for Aug. 1, deferred from July 15. America’s Styrenics and Ineos/Nova also announced new hikes of 4¢ on crystal and 5¢ on HIPS for Sept. 1. Total was still on the sidelines in mid-August.
The mid-July increases widened the spread between GPPS and HIPS to 6¢ from 4¢ in July and 2¢ on average before that, largely because of the worldwide tightness of butadiene rubber.
Meanwhile, EPS producers all announced 5¢ hikes for Aug. 1. Nova announced another 5¢ for Sept. 1, though BASF and Flint Hills (formerly Huntsman) posted 3¢ hikes for that date.
Contributing factors: Contract benzene was still high at $4.45/gal in August, up from $4.16 in July—hence the lack of resistance to the August PS hike. But spot benzene was only $4.15 to $4.20 and September prices are a dime lower still. So processors feel the September PS increase isn’t justified.
Ticona, the sole North American producer of UHMW-PE, implemented two price increases in mid-June and August. Prices are now $1.22 to $1.52/lb, up from $1.00 to $1.25.
Ticona also raised prices 15% on July 31 for acetal, PBT, PET, polyester TPE, and Celstran long-glass compounds. DuPont boosted nylon prices 29¢/lb on Sept. 1. Zytel HTN nylons and PPAs went up 15¢, and acetal 15¢, while PBT, PET and Hytrel polyester TPE rose 12¢/lb. LCP and other specialties went up even more. Solutia hiked nylon 66 10% on Sept. 1. And on July 28, Rhodia imposed a “temporary surcharge” of about 3.6¢/lb on nylon 66 to compensate for the worldwide shortage of butadiene.
Evalca hiked Eval EVOH barrier resins by 45¢/lb on Sept. 1.
BASF lifted tabs on Styrolux and Styroclear styrenic block copolymers (SBCs) by 6¢/lb on Aug. 1. Kraton Polymers said its entire Kraton SBC line would go up “at least” 15¢ on Sept. 1.
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..