2008 resin pricing year in review

A year that looked to be defined by record-high resin prices, with key polymers testing and breaking the historic high water mark of $1/lb in July, finished with a pricing collapse that brought many materials to multiyear lows. The run up largely synched with the rapid inflation in oil, which peaked at just under $147/barrel in July, ending the trading year below $40/barrel.

At the start of July, Michael Greenberg, CEO of spot-trading platform The Plastics Exchange (TPE; www.theplasticsexchange.com), note that the ethylene market was trading near its historic highs, sending key resins like polyethylene (PE) soaring, while placing converters under duress. "Higher prices and damaged margins have placed financial strain on many processors," Greenberg said, "and their sustainability is a concern, especially for smaller shops."

Greenberg noted that even at $0.90/lb and higher, fresh railcars of spot polypropylene (PP) disappeared as soon as they hit the market. That was due in part to the fact that contracts added $0.08/lb in June and looked to increase July resin contracts between $0.08 and $0.18/lb depending on July propylene contract settlements.

The next week, TPE wondered whether PE had finally peaked after rising $0.11/lb in the second quarter and $0.04/lb at the start of the third quarter, when a dip in spot ethylene prices brought a halt to PE price increases. At this point, Greenberg said further price increases for PE, which totalled $0.15/lb at the time, including $0.08/lb for August, could be challenged. PP, however, continued to rise, with producers nominating July price increases as high as $0.18/lb. "We are looking at the highest polypropylene prices on record," Greenberg said, "and some offers have been made above the $1.00/lb level."

In polystyrene (PS), some generic-prime supplies from producers eclipsed $1.00/lb.

Polymerupdate (http://www.polymerupdate.com), which supplies global resin pricing information, reported at the time that although buying momentum in PP may have slowed in Asia due to the current high prices, traders it spoke with remained very bullish in their July and August outlooks. The likelihood of higher prices was not only linked to rising upstream costs, but also to ample PP demand outside Asia, including Latin America, with buyers there willing to pay prices well above $2000/tonne FOB.

By the third week in July, resin market participants wondered aloud whether PE, PP, and PS had finally peaked. Spot prices had slipped in North America, dropping by about a penny, with high density and linear low density PE trading in the mid $0.80's/lb, while low density resided in the low $0.90's/lb. At this level, PE was still up to $0.10/lb higher than June levels.

PP fell back as well after approaching the $1/lb mark, on the basis of weak domestic and export demand. Despite the drop for the week, PP still finished $0.04/lb higher for July and up $0.15/lb compared to June. Spot PS held steady, as general-purpose grades closed at $0.91/lb and high-impact PS finished at $0.96/lb.

In international markets, Polymerupdate noted that Asian and European producers were weighing price increases against the possibility of demand destruction. Polymerupdate cited an unnamed South Korean PP maker that had decided to leave price offers to China unchanged for now in spite of high cost pressures, since sales to select Asian markets had stagnated. PP homopolymer injection and raffia grade offers were at $2100/tonne CFR China Main port, with film grades higher.

As July came to a close, TPE noted that PE producers continued to push for a $0.07/lb price increase to July contracts and had already issued a $0.08/lb price increase for August contracts. TPE reported high-density PE prices in the low-to-mid $0.80's/lb, with linear low-density hovering in the mid-to-upper $0.80's/lb, and low-density PE above $0.90/lb. PP's July contracts were up roughly $0.10/lb with August increases of $0.06/lb looming. Most offers remained above $0.90/lb and many were closer to $1/lb.

At this time, Polymerupdate noted the price decline which ultimately defined 2008 began in earnest throughout Asia, with drops across a broad swath of resins and monomers, including PP, PE, ABS, SAN, and PS. A Japanese trader contacted by Polymerupdate reported that buyers had withdrawn from the market while many traders worked to liquidate current inventories, anticipating further price drops.

The drops continued unabated through the rest of the summer and into the late fall. At the start of November, TPE and its reporting partner, The PetroChem Wire (www.petrochemwire.com), saw multiple cent drops each day in PP, with fresh generic-prime railcars of homopolymer PP offered in the low $0.40's/lb and even the high $0.30's/lb, off dramatically from prices in the low $0.50's the week prior.

In Asia, Polymerupdate reported that high-density polyethylene (HDPE) sank below $900/tonne CFR Asia, with injection-grade prices at $800 to $820/tonne CFR Far East Asia and South East Asia. HDPE film prices fell to $880/tonne CFR Asia, with Polymerupdate citing a plunge in ethylene feedstock prices coupled with soft buying. A trader reached by Polymerupdate said the $150/tonne price drop last week, and other triple-digit adjustments "are no more a novelty".

By the middle of November, TPE reported that PP was in a "freefall", with some discussion that contract prices could ultimately end $0.30/lb lower for the month. PE contracts were down roughly $0.20/lb for November, following an $0.11/lb drop in October, and $0.07/lb in September. Prior to the market's peak, PE contracts increased $0.18/lb during 2008, but fall's drop saw contract prices lowered by $0.38/lb, leaving current prices at levels not seen since 2004.

By the end of November, Polymerupdate reported some small gains in Asian prices, including polyvinyl chloride (PVC), high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), and low-density polyethylene (LDPE).

In the North American market, PE contract prices finished down $0.20/lb, following a $0.11/lb decline in October, and a $0.07/lb fall in September. When the midsummer $0.18/lb run up is accounted for, the net move for 2008 was a $0.20/lb decrease. How low did prices go? TPE reported instances where generic-prime PP offers were actually seen in the mid-$0.20's/lb. November PP contracts finished with a $0.30/lb decrease after falling by $0.25/lb between September and October. General-purpose PS spot prices were in the low $0.60's/lb, with high-impact PS around $0.70/lb.

Continued drops in oil, as well as weak overall demand, point to stagnant prices as 2009 begins, although multiple double-digit production cuts at the world's largest resin producers could place the pricing ball back in the polymer manufacturers' court.

 

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