Where PE, PP Prices Might be Heading into Q2

We’ve been reporting on rising prices of all commodity resins, including engineering resins ABS, PC, nylons 6 and 66, as well as key additives through first quarter. Generally, higher energy and raw material prices have been cited as the key contributing factors. Still, the nuances of the high-volume PE and PP markets make the pricing movements of these resins particularly intriguing, if not vexing.

Checking in with our sources at Houston-based PetroChemWire (PCW) as March comes to a close, we get an interesting scenario of how things might shape up in April and the second quarter, overall. Here’s where things are these days:

● PE: Following the implementation of the February 5¢/lb price hike, suppliers have aimed for a March 6¢/lb contract price increase; but, the push appears to have splintered with a couple of suppliers revising their original increase into a 3¢/lb hike in March and a 3¢/lb hike in April. 

Meanwhile, PCW reported that PE spot prices were mixed and availability was still snug, with the exception of a few grades showing some loosening. Overall, interest in spot buying in both domestic and export markets was lackluster, though domestic prime contract orders were viewed as healthy.

Here’s how PCW’s Senior Editor David Barry weighed in when asked how he ventures things might shake out:

“I think the PE producers have a good chance of implementing the front half of the 6¢/lb March initiative, but getting another increase in April is looking less likely. The U.S. export market appears to be slowing down as a result, and U.S. producers will likely have to lower prices if they need more export volume. Domestic PE demand is healthy, but buyers in the spot market, generally, are in no hurry to place orders. There are a few pockets, such as HDPE injection and LDPE film, where the market appears tight, but overall I sense things are balanced.”

He noted that he had not heard of any comments that imported PE finished goods (e.g., bags) were posing more of a threat than usual.

● PP: Following the implementation of the February 6¢/lb price hike, in step with propylene monomer, PP contract prices were poised to move up by 4¢/lb, tracking the monomer contract movement. PCW reported that market talk has been focused on the potential for lower prices in second quarter—this based on expectations of a loosening in propylene monomer supplies. Meanwhile, spot prices were reportedly stable, with snug availability balanced by lackluster demand.

Weighing in further, PCW’s Barry said:

“It’s a widely-held belief that the 4¢/lb March increase will bring the PP market to a peak, and 2Q will bring some correction. The main question in my mind is: what is the depth and timing of that correction? Given that many buyers seem to be holding off on buying PP until prices drop, I expect that there will be a healthy rebound in demand once that correction occurs. Also, PP demand is seasonally stronger as we get into the warmer months. This restocking dynamic may allow suppliers to regain some of the PP margins they lost last year.”

Asked about the impact of imported PP pellets this year compared to 2016, Barry said:

“Imported pellets are on the way, but buyers are being much more cautious this year…and, I’m being told that the impact of that additional supply will be smaller than it was in 2016.”