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Feedstocks Push Resin Prices

Posted by: Mu Ju 2019-10-03 Comments Off on Feedstocks Push Resin Prices

Despite lackluster domestic demand, relentless increases in feedstock costs are forcing suppliers to push for higher resin prices. PVC demand is slack enough to put hikes in doubt.

Polyethylene prices rose 3¢/lb in April, half of the 6¢ increase announced in December. The second half was expected to take effect in May, and a new 5¢ hike was announced for June 1. The London Metal Exchange (LME) North American futures contract for June in blown film butene LLDPE was 68.5¢/lb, up 0.9¢ from May.

Contributing factors: Mike Burns, global business director for PE at resin purchasing consultant Resin Technology, Inc. (RTI) in Fort Worth, Texas, expected PE suppliers to get their 3¢ hike in May. Domestic demand was down 3% to 6% in the first quarter vs. a year ago, and little improvement was expected in the second quarter. But resin operating rates reportedly are still running near 90%, thanks to export demand. “PE exports are still above average, yet lower than the very high levels of last year,” said Burns.

In addition, March’s ethylene monomer contract price had moved up from 58.5¢ to 61.5¢/lb, and spot ethylene prices also rose a few cents in April. Upwards movement seemed likely to continue, driven by low ethylene supplies. At press time, monomer contract negotiations for April/May involved possible increases from 3¢ to over 6¢/lb.

Polypropylene prices moved up 3¢ to 4¢/lb in April in a partial implementation of an announced 5¢ hike. An additional 5¢/lb increase for May 1 was revised upward by some suppliers to 7¢. Meanwhile, LME’s June North American short-term futures contract for g-p injection-grade homopolymer sold for 73.94¢, up more than 5¢ from May.

Contributing factors: Rising costs of feedstocks and energy to produce PP are cited by suppliers as justifying higher resin prices. Propylene monomer rose 5.5¢/lb in March and April, reaching a new record of 65¢/lb. Negotiations for May contract prices signaled increases of at least 4¢. Tight monomer supplies are not expected to ease soon. Scott Newell, RTI’s director of client services for PP says June could see another resin price hike.

Domestic PP demand was down 6.5% through April vs. last year. Exports dropped 20%, as U.S. resin prices are now too high. Suppliers have cut back North American PP capacity, and LyondellBasell just announced plans to halt PP production at the Equistar plant in Morris, Ill., by the end of the year. Suppliers’ resin inventories are pretty well balanced vs. demand. Says RTI’s Newell, “They are only making as much as they can sell. This gives them the leverage to pass through price increases as feedstock costs rise.”

PET prices moved up 5¢/lb as suppliers implemented their April increase. The move was driven by higher feedstock costs. In April, paraxylene went up 4¢/lb and ethylene glycol rose 2¢/lb. Together they translate into at least 2¢ to 3¢ higher cost/lb of PET. Although suppliers project increases in domestic demand of 5% to 6% this year—significantly less than the double-digit growth of recent years—first-quarter demand was flat. Some improvement is expected by mid-year, peak season for PET.

PVC prices eventually settled up 2¢ in March and April, an increase deferred from Feb. 1. In May, PVC producers all announced a 4¢/lb hike for June 1. These increases are based solely on feedstock costs. Demand is still so weak that processors say any increase will have to be delayed. A bump upward in May was attributed to prebuying.
PS UP 4¢ TO 6¢

Ineos announced a hike of 4¢/lb for crystal PS and 6¢ for HIPS as of June 1. It was supported by Total and Americas Styrenics, the joint venture between Dow and Chevron Phillips, which went live May 1. The hikes are based on soaring benzene costs. Contract benzene hit $3.87/gal in May, up 12¢ from April. Butadiene rubber, which makes up 8-10% of HIPS, is short and on allocation, adding more cost pressure. Meanwhile demand picked up slightly, though not to normal spring levels.

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