Trajectory Switch in PE, PP Pricing? PS, PVC Prices Holding?

Going past the mid-month mark, pricing for four of the large volume commodity resins was still uncertain.

A switch in the trajectory between PE and PP—now down-to-up, appears to be in the offing, while PS and PVC prices seemed to be in something of a holding pattern. Here’s the latest take from PetroChemWire (PCW), and Michael Greenberg, CEO of the Plastics Exchange.

PE: PCW senior editor David Barry characterized domestic demand in the secondary market as lackluster as a result of industry sentiment that prices would move lower. Similarly, TPE’s Greenberg reported that while buyers in need purchased material, there was a lot more “window shopping”. He noted that processors appeared to be testing the market for price—both due to the pending 3¢/lb increase that was rolled over from March into this month and proposed tariffs. “Export prices in Houston have been coming under pressure to remain competitive on a global basis. Upstream inventories continue to build and it seems like the market might just be running out of steam; perhaps producers will volunteer a friendly price decrease in early May before meeting up with customers at NPE,” wrote Greenberg.

PCW’s Barry reported that preliminary industry data for March showed North American PE operating rates at 94%. “This resulted in production outpacing sales by 434 million pounds across all grades. It was also noted that suppliers would need to carry additional inventory to support the higher baseline of export activity from the new plants.”

PP: Following a double-digit drop through first quarter, PP prices might stabilize or move up a bit. As previously reported, several PP suppliers have been out with price increases of 3-5¢/lb, effective April 1. PCW’s Barry sees this margin increase initiative gaining momentum as one major PP supplier has now come out with a 4¢/lb increase, effective May 1.

Greenberg reported that continued production disruptions, including two Force Majeure situations, resulted in continued snug PP supplies. He noted that while offgrade PP prices were soft, with a majority of the exported, getting your hands on larger volumes of prime PP was challenging. As a result, he expected PP suppliers to use the tight supply/demand conditions as the rationale to implement margin enhancing price increases.

PS: PCW’s Barry reported that PS prices appeared to remain steady, with limited spot market activity. As previously reported, PS prices generally moved up 4¢/lb in March, as suppliers forced through that increase—a move attributed to tight styrene monomer supplies due to unplanned outages. But industry pros generally expect a shortened life for that increase. PCW characterized overall PS availability as  adequate, adding that there has been minimal impact on PS operations following first quarter styrene monomer outages. Also, by mid-April, the 30/70 spot ethylene/benzene formula had dropped by about 2.2¢/lb.

PVC: Prices appeared to have moved up 2¢/lb in March, out of their original 4¢/lb March hike. However, PCW’s Senior Editor Donna Todd reported that suppliers’ efforts to implement the second portion of that increase this month appear to have floundered. She also questions, as do other industry sources, how long the existing prices will hold out, as was the case last year.

The ‘culprit’ for PVC suppliers is the continued erosion of ethylene prices. Noted Todd, “Suppliers said they are trying to decouple the price of PVC from the price of ethylene in their conversations with customers and focus instead on market forces such as supply and demand. They admitted this will be difficult to do since they trained customers to believe that ethylene is the market price driver. Also, if suppliers were able to convince customers to decouple the two products, they could then not use the ethylene price to raise PVC prices when the ethylene market rebounds.” Todd adds, that barring any hurricane type disruptions, prices of ethylene are like to continue to be under downward pressure for the next few years due to new capacity coming on stream.