Most commodity prices drop, but PE stays flat
North American prices for most commodity resins continued to drop in October. Price declines were seen in markets for polypropylene, PVC, polystyrene and PET bottle resin. Polyethylene prices in the regions were flat for the month.
Regional PP prices were down an average of 15 cents per pound, according to market sources contacted by Plastics News. That drop was a combination of a decline in price for polymer-grade propylene (PGP) feedstock and buyers reclaiming some margin from PP makers, sources said. The PGP market couldn’t reach a settlement price for October, but the drop was estimated to be 10-12 cents. PP buyers then regained 3-4 cents in margin.
PP prices in September had tumbled 8 cents per pound. Prices for the material now have declined for five consecutive months. Combined with other increases and decreases, PP prices now are down a net of 36 cents so far in 2022.
On the capacity front, new PP supplier Heartland Polymers recently began production of homopolymer resin at a plant in Strathcona County, Alberta. Heartland is expected to produce more than 1 billion pounds of PP annually.
PVC prices were down 5 cents in October, marking the fourth consecutive month that prices had fallen by that amount. Prices now are down a net of 19 cents since Jan. 1.
Construction activity is a main driver of PVC consumption. U.S. housing starts in September actually were up more than 1 percent vs. August, but they were down more than 7 percent vs. July and more than 3 percent vs. September 2021. As a result, the PVC market is being affected by both higher inventories and lower seasonal demand.
Prices for both solid and expanded PS were down 4 cents in October after another price drop for benzene feedstock. Market prices for benzene — used to make styrene monomer — were down 28 cents to $2.89 per gallon, a drop of almost 9 percent.
Previous benzene price drops in August and September had sent PS prices down a total of 35 cents. Even with the three recent drops, PS prices are up a net of 18 cents since February.
Lower U.S. gasoline prices in recent months have caused benzene prices to decline. Benzene is added to gas to increase its octane rating, which can improve engine performance.
One market watcher said U.S. PS makers recently have increased inventory levels by 10 million pounds in total. “That’s a lot of resin available in the domestic market,” the source said.
PET bottle resin prices declined by 2 cents in October after sliding a total of 24 cents from July through September. Even with these recent drops, PET prices are up a net of 22 cents so far in 2022. The PET picture is clouded by contract buyers — with prices tied to feedstocks — actually seeing slight price increases on PET last month. PN is showing the market price for the material.
The September PET price decline had been the result of a price decrease for paraxylene feedstock, combined with lower demand and higher inventories of PET. Strong seasonal demand for bottled water and other beverages played a role in earlier PET price increases, as well as a lack of new capacity and freight and logistics challenges.
PE makers were able to hold prices flat in October by reducing production and increasing the amount exported from North America, sources said. These moves were able to counteract drops in domestic demand caused by an economic slowdown.
PE giant Dow Inc. in late August announced plans to temporarily reduce global nameplate capacity for PE by approximately 15 percent. Other PE makers are believed to have reduced production as well.
Average selling prices for PE had been down 3 cents in September and a total of 10 cents from July to September. Prices for all grades of PE are down a net of 2 cents so far in 2022.
Even with recent PE prices flat, the industry has been active. On Nov. 15, Shell Chemical announced the start of production at its massive 3.5 billion-pound-capacity PE unit in Monaca, Pa., near Pittsburgh. It’s the first major PE manufacturing complex in the Northeast U.S. and the first U.S. plant built outside of the Gulf Coast in at least 40 years. Officials said the complex is strategically located within a 700-mile radius of 70 percent of the U.S. PE market. The complex is expected to reach full production rates in the second half of 2023.
Not to be outdone, the very next day Chevron Phillips Chemical Co. and QatarEnergy announced the formation of Golden Triangle Polymers Co. LLC, a JV that will spend $8.5 billion to build a petrochemicals complex in Orange, Texas. Construction will begin immediately on the project, with operations expected to begin in 2026. The complex will have two HDPE lines, each with annual capacity of 2.2 billion pounds, and an ethane cracker with annual capacity more than 4.5 billion pounds.
CP Chem will have a 51 percent stake in the JV, which was first discussed publicly in 2019. CP Chem and state-owned QatarEnergy have collaborated for more than 20 years on assets they operate together in Qatar. QatarEnergy, formerly Qatar Petroleum, is the world’s fifth-largest natural gas supplier. The firm had sales of $21 billion in 2020.
Access to low-priced natural gas has allowed North American PE makers to add billions of pounds of capacity in the last decade. Large amounts of this new capacity is being exported, since the amount being added far exceeds what’s needed to meet North American PE demand growth.
Market veteran Howard Rappaport, a senior adviser with StoneX Financial, said that although large amounts of PE continue to be added in North America, it’s “quite likely” that the economic climate in the U.S. will have improved sufficiently by the time the CP Chem JV capacity comes on to sustain a level of PE consumption more in line with historical norms.
“As we’ve seen with a number of incremental world-scale projects over the years, a lot can happen between the time it gets announced, financed, engineered and built,” Rappaport added.
Esteban Sagel, principal at Chemical & Polymer Consultants in Houston, said the industry “needs to look at this announcement from a counter-cyclical point of view.”
“We are likely at the beginning of a polyolefin downcycle, which may last anywhere from one to two years, depending on how the economy evolves from this point forward,” he explained. “By 2026, it’s likely that we’ll be in the upswing side of the cycle, which is exactly when you want to start a new plant.”
In feedstocks, oil and natural gas prices went separate ways in October. West Texas Intermediate oil prices opened the month at $79.50 per barrel but increased to $86.50 by the end of the month for an upward move of just over 8 percent. Prices since that point fell back 7.5 percent to close just over $80 on Nov. 20.
Markets for natural gas — used as a feedstock to make PE and PVC — started October at $6.77 per million British thermal units but slid 6 percent to $6.36 by the end of the month. Prices since then ticked down another 1 percent to close at $6.30 on Nov. 20.
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