Prices Flat for PE, PS, PVC; Up for PP & PET

Last month's pricing trajectory was somewhat surprising with more eye openers possible for the July/August timeframe and beyond, as trade war looms.

The pricing trajectory of the five, key, volume thermoplastics through the month of June and the 4th of July festivities had some extra fireworks. In the case of PE, PS, and PVC, we saw lower feedstock prices and generally more balanced supply and demand keep prices flat. Contrasting that was upward pressure from feedstock costs and stronger domestic and global demand, which pushed PP and PET prices higher. And, looming over all of this, was the “trade war” issue. This according to purchasing consultants Resin Technology Inc. (RTi), PetroChemWire (PCW), and Michael Greenberg, CEO of The Plastics Exchange. Here’s a glimpse for each.

PE: Prices remained flat, though it was widely expected that suppliers would push through a 3¢/lb price hike, initiated by ExxonMobil Chemical, which led the move. That supplier announced an additional 5¢/lb for July 1, on certain ethylene-octene and EVA copolymers, as first reported by PCW. But, by July 1, Nova Chemical, CP Chem and Formosa had pulled back, according to Mike Burns, RTi’s v.p. of PE markets. PCW and The Plastics Exchange’s Greenberg reported the same and noted that flat contract prices were in line with spot-market prices.

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“Meanwhile, North American PE suppliers still enjoy a major feedstock cost advantage to facilitate exports, which is how they plan to move the bulk of all this new PE production that seems to be backing up. Also, the whole tariff situation has yet to resolve, maintaining a level of uncertainty, and not just with China,” noted Greenberg. RTi’s Burns added that it’s simply a better deal for suppliers to push exports right now—with 65% of exports currently going to Latin America. He also ventured firm PE pricing through September.

PCW’s senior editor Dave Barry characterized domestic PE demand as healthy, adding that some processors were opting to carry additional inventory as a hedge against hurricane-related disruptions. He also noted there were reports that tight supply of catalysts and comonomers butene and hexene could restrict PE output, but no significant supply impacts were confirmed by anyone.

PP: Prices moved up 8¢/lb in June, following May’s 7¢/lb hikes. This was the second major spike in PP pricing following the January/February timeframe. Still, this time the increase was penny-for-penny in step with propylene monomer contract increases, with no margin expansion added by suppliers. “I think margin expansions have quieted down for the near term,” said Scott Newell, RTi’s vp of PP markets. He ventured that PP prices may have peaked in June and sees prices in July and August as likely to be flat or lower.

PCW’s Barry reported spot PP prices as generally firm and supply as balanced to tight, driven by strong demand and June production interruptions at Total and Braskem. Also noted was that domestic PP prices were sufficiently elevated over global price levels to invite imports of both resin and finished goods. Greenberg characterized the overall domestic PP market as still fairly tight, with branded prime resin prices at a sharp premium to good offgrade resins. He ventured an easing of cost-push pressures in July and beyond, as indicated by dropping spot monomer prices.

PS: While prices remained flat in June, downward pricing pressure was underway, with processors aiming to negotiate for price concessions of 2-3¢/lb, based on lower feedstock costs and an improved supply/demand balance, according to both PCW’s Barry and Robin Chesshier, RTi’s v.p. of PE, PS and nylon 6 markets.

Both sources cited falling prices of benzene and ethylene. According to PCW, implied styrene production costs based on a 30/70 formula for spot ethylene and benzene were 1.3¢/lb lower toward June’s end—at 30¢/lb. Chesshier also cited suppliers’ difficulty in exporting styrene monomer due to tariffs from China, as well as the recent New York City ruling that upheld a ban on PS cups and containers, which is likely to have an impact on PS demand. At the same time, she ventured that July was the last opportunity for processors to get some price concessions, as the August-September time frame is typically when suppliers push for increases due to global demand—particularly from Asian appliance markets.

PVC: Prices remained flat through June, despite good domestic demand and high operating rates—now above 90%, according to Mark Kallman, RTi’s v.p. of PVC and engineering resin markets. Both he and PCW’s senior editor Donna Todd predicted continued flat pricing for the remainder of the summer, and possibly beyond.

Downward pressure from very low ethylene costs has been ignored by suppliers, so far. According to PCW’s Todd, suppliers appear to be telling processors that high export demand is squeezing the market, while at the same time telling traders that high domestic demand is the culprit. Kallman noted that global PVC demand is not as strong as in previous years and that while domestic suppliers have increased their export activity due to their low ethylene cost, PVC export prices have not increased commensurate with the volume exported.

Kallman hazarded that some upward pressure on ethylene contract prices is likely due to higher oil prices and trade tensions. Still, PCW ventured that ethylene capacity additions coming on stream this year—which will boost U.S. ethylene production by 15.3% from current levels—are likely to push PVC prices lower. Another factor is possible imposition of tariffs on U.S. PVC by current importing countries (especially China).

PET: Domestic bottle-grade PET prices in June moved up by 2¢/lb to 78¢/lb for non-contract spot business, delivered Midwest, according to PCW senior editor Xavier Cronin. This was attributed to higher cost for feedstocks PTA, MEG, and MX, along with strong demand from the U.S. packaging sector during the high-consumption summer season.

Meanwhile, PET imports from Asia were offered at 78¢/lb, up from 72-74¢/lb in the previous month. PCW’s Cronin reported that imports are rising despite the anti-dumping fees imposed in May on imports from five countries—Brazil, Indonesia, South Korea, Pakistan, and Taiwan—because of a global glut of PET, and the U.S. is one of the largest PET markets in the world.