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PE, PP prices on the rise to start 2024

Chevron Phillips Chemical Co. had reduced operating rates in January because of cold weather. 

After a quiet holiday, North American markets for polyethylene and polypropylene resins started 2024 with higher prices.

Prices for all grades of high, low and linear low density PE were up 5 cents per pound in January, with prices for PP up 3 cents, according to market sources contacted by Plastics News.

PE prices had been flat for the previous three months, while PP prices were flat in December after increasing in each of the previous three months.

Buyers fought the 5-cent PE hike, but it ultimately went through as PE makers leveraged production issues that hit the Gulf Coast after freezing weather in mid-January. Ethylene and propylene units operated by Formosa Plastics Corp. USA in Point Comfort, Texas, were affected by the cold. Major PE makers now are also seeking a 5-cent increase for February.

Both Ineos Olefins & Polyolefins USA and Chevron Phillips Chemical Co. had reduced operating rates in January because of the cold weather. Ineos took that action on an ethylene cracker at its Chocolate Bayou plant in Alvin, Texas, while Nova Chemicals shut down a site in Geismar, La., making ethylene, propylene and butadiene.

Nova spokeswoman Jennifer Nanz said that the firm "accelerated the planned shutdown" of its Geismar facility for a scheduled turnaround by several days, closing it on Jan. 16. The site is expected to reopen in late March.

Market analyst Mike Burns with Plastic Resin Market Advisors said PE inventories on the processor level are "healthy," as many buyers bulked up supplies in December to fill their needs for early 2024.

Burns added that North American PE makers also had a "big export month" in January as Europe bought more material to make up for shipping constraints in the Red Sea caused by political conflict in the Middle East.

Howard Rappaport, a market analyst with StoneX in New York, said export markets "are providing a relief valve" for North American PE makers.

"Exports are stopping the North American market from being awash in [resin] products," Rappaport added.

North American PE makers "have been quite successful in increasing their exports, in line with the expansion of capacity," according to Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston.

"There was a big disconnect in 2021, but lately the trend in incremental exports vs. 2015-16 has been for the most part aligned with the increment in capacity," Sagel said.

"In other words, producers have been able to successfully move the new material into the exports market," he added. Sagel estimated that regional PE demand was down 5 percent in 2023.

Historically, 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 has 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.

Sagel said that the increased reliance on exports "comes at a price" for North American PE makers.

"The new reality for exporters is that they had to change the mix in their trade portfolios," he added, moving their focus from North and South America to Northeast and Southeast Asia.

Both regions in Asia "are more competitive in prices, so [export] producers took a hit," Sagel said.

Global PE prices declined in the third quarter of 2023 vs. the same period in 2022, although those declines were partially offset by the higher sales volume.

"So [PE] producers may be selling more, but the sales, particularly for exports markets, carry lower prices," Sagel said.

In the U.S., Sagel said PE profit margins on domestic sales are the lowest they've been in a decade, so producers "will do everything they can to try to keep them from falling further."

"The [January] freeze provides a good argument for increasing [PE] prices, but … with demand in the region being in the dumps … and having to be competitive in the exports market, I suspect prices for PE will either stabilize or decrease a little bit this year," he added. "I don't expect major price declines, but more a sideways move in prices."

These factors also were reflected in recently reported full-year 2023 results for Dow Inc.'s Packaging & Specialty Plastics unit — including one of the world's largest polyethylene resin businesses. For the year, P&SP had sales of $23.1 billion — down 21 percent — and operating profit of $2.7 billion – down 34 percent.

PP increase echoes PGP hike

The January PP price hike again followed a change in price for polymer-grade propylene (PGP) feedstock. North American PP prices were up a net of 17 cents per pound in 2023.

As with PE, the PP market was affected by the Gulf Coast cold snap. In addition to the Ineos and Nova cutbacks, Enterprise Products briefly shut down a PDH unit making propylene monomer in Baytown, Texas.

After the cold snap, mechanical issues led Ineos to place force majeure supply limits on PP resin made at Chocolate Bayou. The site has annual production capacity of about 1 billion pounds of PP. Ineos also operates almost 4 billion bounds of ethylene capacity and almost 1 billion pounds of propylene capacity there.

Ineos' force majeure declaration "adds to the challenges faced by the [PP] supply chain in the United States," according to a report from ChemAnalyst.com. It added that the force majeure status "implies that Ineos is temporarily freed from contractual obligations due to unforeseen circumstances, signaling potential disruptions in the supply chain."

Recent upswings in PP pricing are at odds with demand for the material, which has been in decline. Market sources cited American Chemistry Council data that showed North American PP demand was down about 4 percent on a monthly basis in both September and October.

Sagel said PP closely follows trends in propylene prices in the region, but since propylene prices are more globalized, the floor of North American propylene prices "is really determined by Asian prices."

"If you add into this that propylene volatility is still an issue in North America because of planned or unplanned supply issues, propylene prices will have wild swings and generally move higher with energy," he added.

Lower PP demand, increased domestic supplies and higher prices vs. other resins or vs. PP from other regions "can have a depressing impact on margins and prices," according to Sagel. "My expectation is that PP prices will trend lower but will be affected by short-term dynamics and be quite volatile," he said.

As at Dow, LyondellBasell Industries saw these market trends affect their 2023 results. Sales at the firm's Olefins and Polyolefins Americas unit, including ethylene, propylene, PE and PP, dropped 22 percent for the year to $11.3 billion, with operating profit down 25 percent to less than $1.7 billion.

* Source : https://www.plasticsnews.com/resin-pricing/pe-pp-resin-prices-rise-new-year

* Edit : HANDLER