Global PE prices expected to become firmer, driven by tight inventories; PP, PS, PVA prices projected to hold steady or decline, driven by improved supply/demand balance, lower feedstock prices, say purchasing consultants

Allison Oesterle

August 29, 2013 (Plastics Technology) – Polyethylene prices are expected to grow firmer, driven by tight inventories, but flat to lower prices are projected for PP, PS, and PVC due to lower feedstock prices and better-balanced supply/ demand. These were the views last month of purchasing consultants at Resin Technology, Inc. (RTi), Fort Worth, Texas (resinpros.com), and CEO Michael Greenberg of The Plastics Exchange, Chicago (theplasttcsexchange.com).

HDPE PRICES UP; MORE PE HIKES POSSIBLE

HDPE suppliers implemented a 2tf/lb increase in June. That apparently encouraged resin producers to attempt to push through their entire three-month pending hike of 2^/lb for HDPE and 4for LL/LDPE, effective July 1.

Mike Burns, RTi's v.p. for PE, noted that PE pricing this year has been driven by inventory levels, not ethylene monomer. For example, the HDPE price hike was aided by very strong May exports to Latin America and Mexico, coupled with unplanned HDPE production disruptions. Burns said that ethylene monomer prices were 9«!/lb lower, while PE prices were ll£/lb higher, than in 2012. Greenberg said that spot PE markets were very quiet at the start of the third quarter and that spot supplies were limited to a few remaining railcars held over from June and warehoused material offered by Houston traders and national resellers.

Neither of these sources expected much success for additional PE price increases, and Greenberg noted that processors would not only resist them but would seek a decrease. However, Burns allowed that PE pricing would trend upward or remain flat for the next 90 days. Factors supporting this view include low supplier inventories, which are below 35 days and will take time to recover; as well as processors stocking up for the approaching hurricane season, strong seasonal demand for packaging in North America and agricultural film-resin exports to Asia, and some planned maintenance outages.

PP PRICES UP, THEN FLAT OR LOWER

Polypropylene prices increased by 3tf/lb in June, in step with monomer prices. While there was a proposed lçi hike for July monomer contracts (which PP prices would follow), implementation was unlikely, said Scott Newell, RTi's director of client services for PP. Barring any unusual production disruptions, both Newell and Greenberg saw potential for monomer prices to drop in July and total of 17tf/lb between March and May, which had left a net 4
Spot PP supplies were characterized as extremely tight last month by Greenberg. He also reported that, sensing the current supply/demand dynamic, PP suppliers are publicly aiming to expand contract margins by 2tf/lb. Most have notified customers that their prices will reflect the change in monomer contract prices plus an additional 2
PP operating rates are in the 90-94% range, above the average of about 88% year to date, according to Newell. PP exports have continued to erode-down 41% from 2012, due to higher domestic PP prices and availability of material from other sources.

PS PRICES DROPPING

Polystyrene prices were flat in June and were poised to drop by the end of last month. Key drivers included a substantial 35tf/gal drop in July benzene contract prices; the three-month (April-June) settlement of ethylene contract prices at 45.5?/lb, a 2.50 drop; and the expectation that seasonal demand for PS would decline through this quarter.

Mark Kallman, RTi's director of client services for engineering resins, PS, and PVC, noted that the benzene price drop equates to a 3.5tf/lb lower cost to produce PS. Although PS suppliers will aim to protect their margins, PS prices were expected to drop 2
Contributing factors cited by RTi's Kallman include the drop in the three-month ethylene contract settlement and the potential for further decline due to an anticipated drop in exports because domestic PVC prices are not attractively competitive. Although domestic demand has been moderate, there is plenty of available material and suppliers' inventories have been growing-despite two planned plant outages in the last two months which were shorter than anticipated and had no impact. CD

By Litli Manolis Sherman, Senior Editor
(c) 2013 Gardner Publications, Inc.

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