August saw price declines in all five major commodity resins in the North American market. Improving supplies, softening demand and feedstock trends were behind the price drops. Regional prices for all grades of polyethylene were down an average of 4 cents per pound, according to buyers contacted by Plastics News.
PE prices had declined by 3 cents in July after being flat in June. Prices for all grades of PE now are up a net of 1 cent so far in 2022.
PE giant Dow Inc. made waves in late August when it announced plans to temporarily reduce global nameplate capacity for the material by approximately 15 percent. A spokesman for Dow in Midland, Mich., told PN that the move is not based on current capacity utilization rates.
In a letter to customers, Dow Packaging and Specialty Plastics President Diego Donoso said the cutback was tied to "continued global logistics constraints," including port and rail congestions in the U.S. Gulf Coast and "dynamic conditions" in Europe.
Dow operates about 17 billion pounds of global PE capacity, including about 7 billion pounds in the U.S. Taking out 15 percent of capacity would remove about 2.6 billion pounds from production, roughly the equivalent of one world-scale PE unit. The Dow production cuts come at a time when Shell Polymers plans to add more than 3 billion pounds of PE capacity at a new petrochemical complex near Pittsburgh by the end of the year.
The Dow action is "an understandable move in the current marketplace, and I wouldn't be shocked to see other producers act similarly," said Jeremy Pafford, North America head at data firm ICIS in Houston.
Major PE makers now are attempting to raise prices by 5 cents per pound effective Sept. 1. One PE market watcher told PN that the North American spot market for PE is going to "tighten up significantly" because of the increase attempt and production cuts.
Polypropylene prices in August ticked down an average of 1 cent, the third consecutive monthly decline for that material. Prices had gone down 7 cents in July and 10 cents in June.
Prices for PGP monomer actually increased by 2 cents in August, but buyers were able to take back 3 cents in margin from suppliers, resulting in the 1-cent decline. Combined with other increases and decreases, PP prices now are down a net of 13 cents so far in 2022.
"It seems the floor has been reached in PP as suppliers push back," one PP market watcher told PN. "But these current market conditions will only last until suppliers are successful in curtailing supply."
New PP supplier Heartland Polymers recently began production of homopolymer resin at a new plant in Strathcona County, Alberta. Once commercial production is underway, Heartland is expected to produce more than 1 billion pounds of PP annually.
Regional polystyrene prices plummeted 25 cents following a major price drop for benzene feedstock, which is used to make styrene monomer. Contract benzene prices for August closed at $4.52 per gallon, a plunge of 33 percent vs. July. Major regional PS makers had taken the rare step of pre-announcing price decreases for August.
PS prices had surged 20 cents in July, matching another benzene swing. Even with the August PS drop, prices for the material are up a net of 32 cents since February.
Tight supplies and high prices for U.S. gasoline had driven benzene prices higher in recent months. Benzene is added to gas to increase its octane rating, which can improve engine performance. Average U.S. gas prices peaked at just over $5 per gallon in mid-June but have since declined and were near $3.84 on Aug. 31, sending benzene prices down as well.
Shayan Malayerizadeh, a market analyst with PetroChem Wire in Houston, told PN that 10-15 percent of USGC benzene production was out earlier in the year for various reasons. These supply issues were partly covered up by styrene outages in the first half of the year, which reduced benzene demand.
PET bottle resin slumped 9 cents in August after sliding 12 cents in July. Prices for the material had jumped 13 cents in June. Even with the July and August drops, PET prices are up a net of 27 cents so far in 2022. According to market sources, the August PET price decline was the result of a large price decrease for paraxylene (PX) feedstock combined with lower demand and higher inventories of PET.
Strong seasonal demand for bottled water and other beverages had played a role in earlier PET price increases, as well as a lack of new capacity and freight and logistics challenges. Higher gasoline demand had lifted prices for PX, which also is used as a gasoline additive.
Although current bottled water demand is flat to slightly down, a March report from Beverage Marketing Corp. said that product became the largest U.S. beverage category ever in 2021, selling more than 15.3 billion gallons, which was the previous high recorded by carbonated soft drinks in 2004. The report added that "unprecedented" input cost increases "may put a damper" on beverage volume growth in 2022.
Regional PVC prices were down 5 cents in August, matching a similar drop seen in July. Prior to those moves, pricing had been flat for two months. Regional PVC prices are down a net of 9 cents since Jan. 1.
Construction activity is a main driver of PVC consumption. U.S. housing starts in June came in at an annual rate of almost 1.69 million, up more than 1 percent vs. the same month in 2021, but down almost 1 vs. May. This trend is a potential indicator that PVC demand is leveling off.
Vinyl Institute President and CEO Ned Monroe recently told PN he sees continued growth for U.S. PVC resin into 2023. VI is a Washington-based trade group that represents leading U.S. producers of vinyl, vinyl chloride monomer and vinyl additives and modifiers.
"We manufacture the highest-quality PVC globally and continue to produce it at a competitive price due to the abundance of U.S. natural gas," Monroe said.
In a recent report, consulting firm C-MACC of Houston said that "given a still wide profit spread between monomer and polymer levels, we foresee downward pressure on domestic U.S. polymer prices, even considering potential export market support due to curbed production."
At a broader level, the U.S. plastics industry is expected to continue to grow in 2022 as it recovers from a pandemic-related decline in 2020. U.S. plastics shipments are on track to grow 1.8 percent in 2022, according to Perc Pineda, chief economist with the Plastics Industry Association in Washington.
Shipments grew 1.2 percent to $468 billion in 2021 after declining 0.9 percent in 2020, Pineda said on a recent webinar. The U.S. plastics industry also climbed from the country's eighth-largest industry in 2020 to No. 6 on that list in 2021, based on the value of shipments.
In feedstocks, oil and natural gas prices bounced around quite a bit in August and beyond. West Texas Intermediate oil prices opened the month at $98.60 per barrel but dropped to $89.55 by the end of the month for a decline of just over 9 percent. Prices since that point have slid another 5 percent to close at $85.10 on Sept. 16.
Markets for natural gas, used as a feedstock to make PE and PVC, started August at $8.23 per million British thermal units and rose almost 11 percent to $9.13 by the end of the month. But prices then began to drop, closing down 15 percent at $7.76 on Sept. 16.
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