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

Contrary feedstock and demand trends lead to divergent pricing behavior.

As we entered August, pricing was a mixed bag for the key five commodity volume thermoplastics: Three of them are trending flat-to-down due to a combination of lower feedstock prices, softer domestic and global demand, and generally improved supply/demand balance. The other two are trending upwards due to pressure from feedstock prices and resin supply tightness. The uncertainty of tariff activity and what this hurricane season may hold are two factors impinging on whether these pricing trends alter their trajectory.

Here is a rundown on each according to purchasing consultants from Resin Technology, Inc. (RTi); CEO Michael Greenberg of the Plastics Exchange; and PetroChemWire (PCW).

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PE: Prices appeared to have remained steady in July, though suppliers were still trying to implement a delayed 3¢/lb hike, and some manufacturers had announced a 5¢/lb increase for August on specialty PE resins, including EVA, according to PCW Senior Editor Dave Barry. Mike Burns, RTi’s v.p. of PE markets, noted that this intent to implement a price hike persisted despite contrary market drivers such as lower global PE prices, high domestic inventories, soft global demand, and steady or lower oil prices.

Burns ventured that lower export prices and soft global demand would delay if not negate further price increases in August and September. As for fourth-quarter pricing, he advised keeping an eye on oil-price trends: “Lower oil prices and soft global demand may end the past year’s continued price increases. Weather will be the last driver heading into this quarter.” Burns noted that the supply disruptions caused by August 2017’s Hurricane Harvey kept prices up until May 2018. Meanwhile, spot ethylene monomer prices slipped back below 15¢/lb—below the 2017 low. Contributing to high supplies was the startup of ExxonMobil’s new ethylene cracker in late July.

PCW reported PE spot prices as flat to lower, noting that availability continued to improve for most PE grades, except for some like HDPE blow molding and HMWPE film, which were characterized as balanced to tight. Greenberg reported very active spot PE trading with steady prices and noted, “Producers have sometimes been vocal in their attempt to finally implement their old 3¢/lb increase, but their plentiful downgraded prime offers suggest otherwise. There is good overall PE availability, and while export shipments have been growing into new record territory, and their pace has been accelerating, the new capacity has generally exceeded demand.”

PPPrices in July held even from June, in step with propylene monomer contracts. Prices in August were likely to be flat to higher, depending on where the monomer contract price goes, according to Scott Newell, RTi’s vp of PP markets.

By July’s end, PCW’s Barry reported spot propylene monomer prices were moving up, as was the case with PP spot prices, which were driven by both the rising monomer tabs and overall tight supply. Both PCW and Newell noted that the gap between wide-spec and prime market prices was wider than normal—almost 10¢/lb vs. the usual 3-7¢, as discounted spot prime offers vanished. Both sources saw price relief in August as unlikely.

Newell said a key issue with propylene monomer is that there is no supply cushion to insulate against adverse events. In addition to unplanned outages at some propylene plants, two key factors are contributing to the tightness: the ethane advantage at refineries, which translates to lower yields of propylene, and the very high volume of monomer exports. “If anything will allow for a decrease in PP prices, it is demand destruction,” Newell remarked.

PCW’s Barry reported that pricing of PP imports in July was attractive on paper, but buying interest was limited, possibly due to long lead times. Newell, however, predicted that lower-cost PP imports were very likely to increase in August and September: “It’s difficult at this juncture to project whether that’s what it will take to see price relief.” He characterized PP demand as “holding up well” but expected some demand destruction.

Both Newell and The Plastic Exchange’s Greenberg noted that suppliers have throttled back production to keep the supply and demand in balance. Newell said production rates, now at about 87-88% of capacity, are down 3% from last year, and he characterizes the current market as balanced to slightly tight. Both sources thought it would be a sensible move for processors to ensure they had adequate inventories as the Gulf hurricane season approached.

PS: Prices dropped 3¢/lb in July and were likely to remain flat in August, according to Robin Chessier, RTi’s v.p. of PE, PS and nylon 6 markets. PCW’s Barry reported PS spot prices as flat to lower amid indications of slower-than-expected downstream demand. Both PCW and Chessier characterized PS supply as balanced and styrene monomer availability as adequate. According to PCW, implied styrene production costs based on a 30/70 formula of spot ethylene and benzene were up 1¢/lb to 31.7¢.

Chessier noted that benzene prices did not react as had been expected when oil prices rose, hovering instead in the $2.85-2.95/gal. range. As a result, it was unusual not to have seen a PS price increase announced for August, she says. She thought that PS prices could remain flat through August and September, partly because this is the start of the seasonal slowdown in demand for the domestic PS market. One thing that could change the PS pricing outlook would be benzene prices rising above $3/gal. “Another big catalyst in September will be whether the Trump administration removes the tariffs on chemicals and plastics as requested by the ACC (American Chemistry Council) on July 25,” explains Chessier.

PVC: Prices in July held even and were likely to stay that way in both August and September, according to Mark Kallman, RTi’s v.p. of PVC and engineering resin markets. He noted that there was no pressure from feedstock prices. Ethylene prices were very low and chlorine prices were relatively stable.

PCW senior editor Donna Todd reported that while June ethylene contract prices (which would be expected to affect July PVC prices) rose by 1.5¢/lb, ExxonMobil’s new 3.3 billion lb/yr ethylene cracker had started up, making it the second olefins unit of that size to come on stream this year.

Both RTI’s Kallman and PCW’s Todd reported that PVC suppliers have been expanding production to take advantage of low ethylene costs. Kallman noted that domestic demand rose, reducing suppliers’ inventories and resulting in a well-balanced market. He cautioned that “tariff activity” brought a certain degree of uncertainty in terms of trade flow. And, PCW’s Todd reported, “More and more overseas markets are being closed to U.S. PVC due to anti-dumping duties or tariffs. India imposed anti-dumping duties on U.S. PVC in 2014, leaving only Westlake able to possibly export to that market. Turkey imposed additional duties of 32% on U.S. PVC in retaliation for the Trump administration’s tariffs on imported steel and aluminum. This has cut off exports to Turkey. China has threatened to impose duties on U.S. PVC in retaliation for U.S. tariffs, but has not yet done so. Nevertheless, buyers there are eschewing U.S. resins out of fear that duties could be imposed after they have ordered the resins but before it arrives. In response, U.S. export prices have begun to fall.”

PET: Prices for domestic bottle-grade PET in July were steady at 76-78¢/lb delivered Midwest, according to PCW senior editor Xavier Cronin. Supply was reportedly bolstered by restarted production at the former M&G Polymers PET plant in Apple Grove, W. Va. With capacity of nearly 805 million lb/yr, the plant was shut down last October after M&G filed for bankruptcy protection. Both the plant and a research facility in Ohio were acquired this past March by Taiwan’s Far Eastern Investment Holdings.

Meanwhile, PET imports from Mexico were down in July due to production issues at plants there. Mexico is the top source of PET imports. Prices ranged from about 71¢/lb delivered duty-paid West Coast to 78¢/lb delivered to plants in the Northeast.

PCW’s Cronin reported that market sources saw the possibility of domestic and import PET prices increasing 2-3¢/lb in August, driven by strong demand in the thermoforming sector. Cronin ventured that prices this month could continue to rise if production disruptions in Mexico remain unresolved. Another factor at play is that PET imports from five countries accounting for about 40% of all 2017 imports—Brazil, Indonesia, South Korea, Pakistan and Taiwan—were hit with anti-dumping duties in May, forcing end users and distributors to seek alternative supplies.