PP, PE, PVC Prices All Headed Up?

The push from suppliers is there but how much, if at all, do the market fundamentals support it?

We are at mid-August and whether prices for polyolefins and PVC are moving up or not isn’t quite clear. This, according to PetroChemWire’s (PCW) weekly reports on PP, PE, and PVC, as well as from the August 11 market update of The Plastics Exchange. The key takeaways:

PP: This is from PCW’s inaugural PP weekly report, prepared by Senior Editor David Barry. Polypropylene suppliers are still out with a 3¢/lb contract price increase for August—a profit margin move, in addition to any change in the August propylene monomer contract price, which has yet to be settled. Judging from spot monomer prices, another modest fractional increase of ½ cent/lb is possible for August contracts. Barry noted that there had been an expectation that the startup of the Enterprise PDH plant this quarter would serve to pressure propylene monomer (PGP) prices downwards. However, other factors cited by industry sources include a tightening up of PGP supply going forward, including ethane cracking being favored versus heavier NGLs and refineries reducing their output of gasoline and reactor grade propylene (RPG) to favor distillate production in the fall.

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Meanwhile, PP spot prices were mixed, with activity light, reported Barry. Supply of homopolymer PP grades was balanced, while copolymer PP was snug. (Ineos has maintained its force majeure on copolymer PP grades as it is still recovering from an unplanned production issue earlier this summer.) There were reports that supplier PP inventories declined by 28 million lbs in July.

The Plastics Exchange’s Michael Greenberg noted the following:

“The polypropylene market still remains relatively tightly supplied—about 4% below the 12-month average. But still, after many months of disciplined production levels, why finally ratchet reactors up to full throttle with a margin-enhancing increase on the table? The timing could be questionable, market fundamentals have been slanted towards bullish, but the super heavy production could impact market sentiment and stymie producer efforts to significantly expand margins in August, hmmm.”

It still makes one wonder how the market could possibly absorb all the new capacity that could begin as soon as the next 5-6 weeks.

PE: PCW’s Barry reported that polyethylene suppliers continued to invoice a 3¢/lb price hike for August contract business. (TPE’s Greenberg noted that while they are indeed pursuing that increase, fundamentals are seemingly stacked against it.) Only two suppliers, to date, have supported an additional 4¢/lb increase, effective September 1.

Meanwhile, PE spot prices moved higher but trading activity was light. A couple of unplanned outages reportedly tightened the HDPE market. LDPE film grade appeared to be the most available product, partly due to weak demand in Mexico and other export markets, while injection molding grade HDPE remained tight. According to Barry, the market’s inclination has been to avoid building inventory as new plant startups are expected in the September-October time frame.

He noted that preliminary data showed the U.S./Canada PE suppliers built up inventory of about 140 million lbs in July, at least part of which was intended to cover upcoming planned outages—scheduled maintenance continued at Nova’s St. Clair swing plant in Ontario, and the company’s nearby Moore site (LDPE/HDPE) is scheduled to shut down at month’s end.

TPE’s Greenberg reported that July was the fifth consecutive month of inventory buildup. “During this streak, these collective upstream suppliers have bulged more than 700 million lbs to surpass 3.9 billion lbs, a rare tally that has been reached just once in at least the past 11 years. Domestic demand in July was almost the exact average of the trailing 12 months. July PE exports eclipsed 700 million lbs, which were just a little light. Reactor rates again ran above 95%, notwithstanding some resin plant turnarounds ahead, it still makes one wonder how the market could possibly absorb all the new capacity that could begin as soon as the next 5-6 weeks.”

PVC: Senior editor Donna Todd characterized the PVC market as quiet this past week and noted that while there were rumors that a price increase had been announced, nothing materialized. She noted that resin suppliers might like to push prices up again, and have been keeping “an eagle eye” on rising spot ethylene prices. Their problem is that contract ethylene net transaction price has dropped by 4¢/lb so far this year, and was low in the last two months. Also, despite recent unplanned production disruptions, the market was viewed as fairly well balanced in terms of supply/demand. “The lack of a cost push or supply pull meant that a resin price hike was seen by buyers as a non-starter at this point,” Todd reported.