The trajectory of resin pricing entering the second quarter is unstable due to the virus outbreak. #Polystyrene#pvc #pet
Contributed by Lily Manolis Sherman
In the middle of the first quarter of 2020, the prices of polyethylene, polystyrene and PVC will rise, while polypropylene and PET also have the potential to rise slightly. In most cases, prices have bottomed out and rebounded and are closer to global prices. Despite major uncertainties, there are reasons to remain optimistic, but domestic demand entering the second quarter is not entirely clear. China is a major importer of PE and PVC made in the United States. To what extent will the coronavirus outbreak affect domestic resin prices. Another uncertainty is the potential impact of a fire at Exxon Mobil’s main refinery in Baton Rouge, Louisiana on February 12.
An ExxonMobil spokesperson told PT that the operation of the refinery and chemical plant is still continuing. When asked how this might affect the availability and pricing of PE, the answer was: "As a rule, we will not comment on the operational status of specific units. We will continue to fulfill contractual commitments and look forward to fulfilling all customer commitments."
This report reflects the views of Resin Technology, Inc. (RTi) procurement consultant, PetroChemWire (PCW) senior editor; and the CEO of Plastic Exchange, Michael Greenberg.
According to the vice president of PE marketing, RTi's Mike Burns, and PCW's senior editor David Barry and The Plastic Exchange's Greenberg, the price of polyethylene initially appeared to be flat in January. However, the two major plastic price indexes, IHS Markit and CDI, reported in early February that the price of PE rose by 4 cents per pound in January.
At the same time, suppliers are seeking another 4-5 cents/lb in February. Burns predicts that suppliers will seek any reason for a February rate hike — all three sources expect this to “affect” through March — and pointed out that the impact of the Chinese coronavirus will change significantly in February and Market outlook in March. "Without global demand and export opportunities, inventories will continue to grow and exceed demand," Burns said.
PCW’s Barry reported that PE spot prices rose in the first week of February and attributed it to tighter spot supplies, at least in part due to increased turnover and unplanned downtime. “However, domestic contract buyers reported that there was no problem with resin supply, and domestic demand was stable, but not very large. As the decline in crude oil prices and the coronavirus outbreak dampened market sentiment, the rise in export quotations in February encountered resistance.”
Greenberg reported that despite the increase in spot prices, spot PE transactions remained healthy at the end of the first week of February as suppliers "finally signed a 4 cents/lb January contract increase." "Although international trade continues to flourish, people are increasingly worried about the potential economic threat of the coronavirus, which frightened the market to a certain extent. Nickel prices are expected to rise in February, but let us fully digest the increase in January. ."
The price of polypropylene was basically flat in January, consistent with the propylene monomer contract that month, but it is expected that the drop in spot monomer prices will cause PP to drop by 1-2 cents/lb. At the same time, in addition to any changes in monomer prices, PP suppliers also announced an increase in profit margins of 3-4 cents/lb on March 1. Scott Newell, vice president of PP marketing at RTi, said that this is to make up for some of the losses in the previous few months, and Greenberg and PCW's Barry support his views.
Newell does not expect that prices will fluctuate too much, and pointed out that the latest PP capacity utilization rate is at a low level in the 1980s, supplier stocks are still sufficient, and PP imports are on a downward trend. Barry added, “PP imports have fallen by nearly half compared to 2019 because the US PP price is flat to global prices.” Due to tight supply, PP spot prices have been flat to higher. He reported that although demand seems to have increased at the beginning of this year, the main driver of the market contraction is the low operating rate, and some planned power outages are either underway or coming soon.
By the end of the first week of February, Greenberg described the PP spot market as a slowdown, mainly due to tight supply and rising asking prices. "Strong demand still exists. Although some people are hesitant to increase prices of 1 cent or 2 cents per pound, the number of stable but not overwhelming transactions is still being completed at a high level. Although some buyers were initially Prices are beginning to rise and they are skeptical, but others recognize that the new PP price level is still very cheap on a historical basis, and are rising in great strides."
Robin Chesshier, vice president of PE, PS and nylon 6 markets at RTi, and Barry of PCW both said that polystyrene prices rose by 3 cents per pound in January, and a rollover is expected in February. Both observe weak seasonal demand with adequate supply.
According to Barry, as of the first week of February, the implied cost of styrene monomer based on the 30/70 spot ethylene/benzene ratio was 28.9 cents per pound, which was a decrease of 0.5 cents from the previous week and 1.2 US cents from the beginning of the year. Chesshier said, "Raw material prices are falling-styrene monomer and ethylene, but there is no demand. However, due to the rising prices of benzene and styrene abroad, monomer prices and PS prices in other places are rising." She also took a risk. Said that as the refinery shifts from winter fuel to spring fuel, the supply of benzene is tightened, and PS prices may face upward pressure in March; coupled with the decrease in benzene imports and the seasonal increase in demand in the second quarter.
According to Mark Kallman, vice president of RTi PVC and engineered resins, and PCW senior editor Donna Todd, in all aspects, the price of PVC rose by 3 cents per pound in January. This happened after prices fell by 2-3 cents/lb in the fourth quarter of 2019. At the same time, there was another 3 cents/pound increase in February. According to Todd, further price increases this month are under consideration.
Kallman predicts that suppliers may get another 1-2 cents per pound from the February interest rate hike, citing stronger than normal demand in January and the possibility of earlier seasonal demand in the construction industry at the end of the quarter. Nevertheless, he believes that the February price move is "difficult" for suppliers, and believes that PVC prices in March may also be flat. His basis is the potential impact of the continued spread of the coronavirus epidemic, which will damage suppliers’ export business and cause domestic prices to face downward pressure.
Todd reports that suppliers’ confidence in further increasing PVC prices is based on several planned and unplanned production interruptions that have led to tight supply. She said that at least in March, or even longer, the supply may remain tight.
PET prices remained stable in February, within the range of 40 cents/lb for delivery in the Midwest and South, and 48 cents/lb for East Coast deliveries. Starting in mid-January, the price of low-quality PET for railcars shipped to the Midwest has been around 40 cents.
PCW senior editor Xavier Cronin described the spot market activity in the first week of January as active because buyers of US end users locked in monthly deliveries, in some cases until February. The weak PET demand in China has exacerbated the oversupply that affects markets in the United States, Europe and other parts of Asia.
Cronin expects that the price of PET resin will fall by 2 cents to 5 cents per pound in February because of oversupply, which exceeds the demand from disposable PET bottle, container and packaging manufacturers. He risked that because the goal of bottle, container and packaging manufacturers is to meet the growing demand for single-serve beverages, water, and other beverages, which usually arrive in the spring when the weather turns warmer, prices in March will be lower than in February. Up a few cents.
Factors include strong domestic and/or export demand, tighter supplier inventories, and rising raw material costs due to production interruptions.
Moisture in PET can cause degradation, which can contaminate sheets and thermoformed products. When drying APET raw and sheet materials, please follow these tips to avoid this.
With the end of the third quarter, the prices of almost all batches of resin are rising or moving in this direction. But the future price will be flat or even lower.
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