Exports, production cuts help drive PE, PP resin price increases

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North American prices for polyethylene and polypropylene resins both saw somewhat surprising increases in September.

PE resin prices moved up an average of 3 cents per pound for the second consecutive month in September. Regional PE prices had been flat in July after dropping 3 cents in June. Counting the September increase, regional PE prices now are up a net of 9 cents in 2023.

Market watchers said higher exports of PE from North America tightened domestic supplies of the material and allowed the September hike to take hold, even though PE demand in the region hasn"t been strong this year.

"Exports are driving the narrative," market analyst Mike Burns said. He added that North American PE makers "need exports now."

Market analyst David Barry believes the main driver of recent PE price increases has been export demand.

"PE suppliers have really upped their export game this year, and we"re seeing that reflected in U.S. trade data," he said in an email to Plastics News. "Some segments of the domestic market seem to be doing a little better, but overall domestic demand is still not robust."

Barry, with PetroChem Wire in Houston, also said third-party export sales "have definitely slowed down since the mid-summer frenzy, and a lot of buyers are anticipating a downward price correction for PE in the fourth quarter."

Market analyst Esteban Sagel, principal of Chemical & Polymer Market Consultants in Houston, said in an email that higher oil prices make U.S. PE exports very competitive. Global PE markets tend to follow oil prices, although producers in North America and the Middle East use lower-priced natural gas as a feedstock.

As recently as the mid-2000s, exports made up only about 20 percent of North American PE sales. Since that point, increased access to shale gas and oil feedstocks have allowed producers to add large amounts of capacity with an eye on the export market. Exports now account for more than 40 percent of North American PE sales.

West Texas Intermediate oil prices were near $71 per barrel in late July, but rose to near $94 in late September after some global oil suppliers cut production. Prices have declined since that point, but still were near $83 in early trading Oct. 5.

According to industry data, U.S. and Canadian high density PE sales into the domestic market were down almost 7 percent through August, but exports of HDPE from the region were up more than 27 percent in that same period. Overall HDPE sales in the region were up more than 2 percent, with production of the material up almost 6 percent.

Production issues at plants operated by Chevron Phillips Chemical Co. in Texas and by Nova Chemicals in Ontario also have affected PE supplies in the region. Both firms have put force majeure supply limits in place at those locations.

Regional PE makers now are seeking increases of 3 cents per pound for October. Market sources were split on the chances of those hikes being successful. "October"s increase is a tough sell after September"s increase barely got over the finish line," one source said.

A reversal for PP

Regional PP resin prices reversed course in September, increasing by an average of 4.5 cents per pound after declining 0.5 cents in August. PN had reported the August decrease as a full cent, but is correcting that number and showing a 5-cent increase on this week"s chart to put the total change for August-September as a 4-cent increase.

Combined with previous increases and decreases, North American PP prices now are up a net of 8 cents per pound in 2023.

Pricing moves for PP again matched changes in price for polymer grade propylene (PGP) feedstock. PGP supplies tightened in September as a result of production outages at some propane dehydrogenation (PDH) units. Those include challenges at units operated in Texas by Shell Chemical and BASF/TotalEnergies.

"Monomer inventories are below average … [and] propylene prices are expected to stay elevated for the next month or two," Barry said. "Some [PP] processors are talking about bringing in PP imports as a hedge against further monomer volatility. There"s certainly enough [PP] resin overseas, but the price is not all that attractive at the moment."

Sagel added that oil also has played a role in PP and propylene market pricing. "The floor of propylene in the U.S. is tightly related to international propylene prices," he said. "With oil moving higher, propylene in Asia is moving higher as well. This drives up propylene in Asia, which helps pull propylene [and PP] higher in the U.S. as well."

"Higher costs, together with plant closures, strong export growth to Latin America and an attempt by producers to stem the decline in margins, are together helping drive [PP] prices higher," Sagel added.

North American PP supplies will be affected by Braskem America"s recent decision to stop production on a resin line in Marcus Hook, Pa. Officials said that step is being taken "to ensure the long-term resilience of [the firm] amid continuing global economic uncertainty and a trough in the chemical industry business cycle."

The shuttered Marcus Hook line has annual production capacity of about 450 million pounds. Braskem operates a second line at the site with the same amount of annual capacity. That line will remain in operation.

* source : https://www.plasticsnews.com/resin-pricing/pe-pp-resin-prices-climb-driven-exports-production-shutdowns?ref=art-recirc