North American Base Resin Prices Drop in August

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August saw price declines for all five major base resins in the North American market. Improving supply, slowing demand and commodity trends drove the price declines. Regional prices for all grades of polyethylene fell an average of 4 cents per pound, according to buyers contacted by Plastics News.

PE prices were down 3 cents in July after being flat in June. Prices for all grades of PE are now up a net 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 around 15%. A Dow spokesperson in Midland, Michigan, said 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 reduction was linked to “continuing global logistical constraints” including port and rail traffic congestion on the U.S. Gulf Coast and “conditions dynamics” in Europe.

Dow operates approximately 17 billion pounds of global PE capacity, including approximately 7 billion pounds in the United States. Removing 15% of capacity would remove about 2.6 billion pounds from production, or about the equivalent of one PE unit globally. Dow’s 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.

Dow’s action is “an understandable move in today’s market, and I wouldn’t be shocked to see other producers act the same way,” Jeremy Pafford, North American director at data firm ICIS, told Reuters. Houston.

Major PE makers are now trying to raise prices by 5 cents per pound starting Sept. 1. One PE market watcher said PN that the North American PE spot market will “tighten significantly” due to the attempted increase and production cuts.

Polypropylene prices in August fell an average of 1 cent, the third consecutive monthly decline for the material. Prices were down 7 cents in July and 10 cents in June.

PGP monomer prices actually rose 2 cents in August, but buyers were able to take back 3 cents of margin from suppliers, resulting in a 1 cent drop. Combined with other increases and decreases, PP prices are now down 13 cents net so far in 2022.

“Looks like the bottom has been hit in PP as suppliers pull back,” said a PP market watcher PN. “But these current market conditions will only last until suppliers succeed in reducing supply.”

New PP supplier Heartland Polymers recently began homopolymer resin production at a new plant in Strathcona County, Alberta. Once commercial production begins, Heartland is expected to produce over one billion pounds of PP per year.

Regional polystyrene prices fell 25 cents following a sharp drop in prices for the raw material benzene, which is used to make styrene monomer. Benzene contract prices for August closed at $4.52 a gallon, a 33% drop from July. Major regional PS makers had taken the rare step of pre-announcing price cuts for the month of August.

PS prices jumped 20 cents in July, matching another benzene swing. Even with the PS drop in August, prices for the material are up a net 32 ​​cents since February.

Limited supplies and high gasoline prices in the United States have pushed benzene prices up in recent months. Benzene is added to gas to increase its octane rating, which can improve engine performance. Average U.S. gasoline prices peaked at just over $5 a gallon in mid-June but have since declined and were near $3.84 on August 31, also lowering prices. benzene price.

Shayan Malayerizadeh, market analyst at PetroChem Wire in Houston, said PN that 10-15% of the USGC’s benzene production was depleted earlier in the year for various reasons. These supply problems were partly covered by the styrene production stoppages in the first half of the year, which reduced the demand for benzene.

Resin in PET bottles fell 9 cents in August after slipping 12 cents in July. Material prices jumped 13 cents in June. Even with the July and August declines, PET prices are up a net 27 cents so far in 2022. According to market sources, August’s PET price drop was the result of a sharp decline paraxylene (PX) feedstock prices combined with lower demand. and higher stocks of PET.

Strong seasonal demand for bottled water and other beverages had played a role in past PET price increases, as well as lack of new capacity and freight and logistics issues. Increased demand for gasoline has driven up prices for PX, which is also used as a gasoline additive.

Although current demand for bottled water is flat or slightly down, a March report from Beverage Marketing Corp. said the product became the largest beverage category in the United States in 2021, selling more than 15.3 billion gallons, which was the previous record high for carbonated soft drinks in 2021. 2004. The report added that “unprecedented” increases in input costs “could dampen” beverage volume growth in 2022.

Regional PVC prices fell 5 cents in August, matching a similar decline seen in July. Before these movements, prices had been stable for two months. Regional PVC prices are down a net 9 cents since Jan. 1.

Construction activity is one of the main drivers of PVC consumption. U.S. housing starts in June hit an annual rate of nearly 1.69 million, up more than 1% from the same month in 2021 but down nearly 1% from May . This trend is a potential indicator that PVC demand is stabilizing.

Vinyl Institute President and CEO Ned Monroe recently said PN it forecasts continued growth in US PVC resin through 2023. VI is a Washington-based trade group that represents the major US producers of vinyl, vinyl chloride monomer, and vinyl additives and modifiers.

“We make the highest quality PVC in the world and continue to produce it at a competitive price due to the abundance of American natural gas,” Monroe said.

In a recent report, Houston-based consulting firm C-MACC said that “given a still-large profit gap between monomer and polymer levels, we expect downward pressure on domestic polymer prices. US, even taking into account potential export market support due to reduced production”.

On 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 expected to grow 1.8% in 2022, according to Perc Pineda, chief economist at the Plastics Industry Association in Washington.

Shipments rose 1.2% to $468 billion in 2021 after falling 0.9% in 2020, Pineda said during a recent webinar. The U.S. plastics industry also fell from the nation’s eighth largest industry in 2020 to No. 6 on this list in 2021, based on shipment value.

In commodities, oil and natural gas prices rebounded a lot in August and beyond. West Texas Intermediate oil prices opened the month at $98.60 a barrel, but fell to $89.55 by the end of the month, down just over 9%. Since then, prices have fallen another 5% to close at $85.10 on September 16.

Markets for natural gas, used as a feedstock to make PE and PVC, started in August at $8.23 per million British thermal units and rose nearly 11% to $9.13 at the end of August. end of the month. But then prices began to decline, closing 15% lower at $7.76 on September 16.

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