Monthly Resin Report: Talk of ‘Green Shoots’ May Be Premature

Zachary Moore

Second-quarter earnings calls brought talks of “green shoots” and a possible end to the de-stocking that has dominated markets for the past several months. However, the same producer earnings calls reflected a not terribly optimistic view of the second half, while the recently released Purchasing Managers’ Index (PMI) data from the Institute for Supply Management (ISM) showed a ninth consecutive decline in US manufacturing activity as well as an 11th consecutive decline for the chemical sector.

Domestic PE resin sales down almost 10%

Domestic polyethylene (PE) resin demand remains sluggish, with sales down 9.4% over the first half of 2023 compared with the same period of the prior year. Total sales, however, were up 2% year on year, reflecting healthy exports. Export transactions as a percentage of total sales averaged 42.8% through the first half of the year and breached the 45% threshold in June. The US ethane advantage results in US cargoes being competitive in virtually all export markets, with US sellers able to profit at price levels that put naphtha-based competitors in the red.

At the time of writing, July PE contracts had yet to settle, reflecting an increasing tendency in the industry for settlement negotiations to drag out into the first or even second week of the following month. Sellers have withdrawn earlier increase proposals and are now seeking a flat settlement, while buyers are pushing for another 3 cents/lb decrease, which would bring benchmark contract prices to flat for the year.

Average industry costs for integrated ethylene producers rose by around half a cent on the month, but had been higher mid-month following an ethane price spike that began to ease later in the month.

The expected startup of new PE plants from Bayport Polymers and Nova Chemicals were both delayed, while Shell’s new unit in Pennsylvania is running but mostly producing off-spec product.

Domestic PP sales reach 12-month high

In the polypropylene (PP) resin market, news on the sales front was rosier. While domestic sales in the first half of 2023 were down 7% year on year, they reached a 12-month high in June, narrowing the gap with the previous year. The market is divided as to whether this represents a genuine demand recovery or is more a reflection of buyers returning to the market to replenish inventories following three consecutive months of declining PP prices during the second quarter.

There are still some signs of weakness in the PP resin market, such as the fact that spot widespec cars traded at or near monomer for most of the first half of the month before gaining a few pennies later in the month. Additionally, while PP stock levels sat at their lowest level for the year in June, this was achieved primarily by the industry keeping average run rates in the low 70s throughout the first half of the year.

After propylene and PP had seen considerable volatility through the first half of the year, July contracts followed propylene monomer to settle flat. Enterprise started up its new propane dehydrogenation (PDH) unit and is currently in the process of ramping up rates, which should result in additional supplies of propylene monomer going forward.

About the author

Zachary Moore has 14 years of experience researching and analyzing the petrochemical markets. His primary area of expertise is in commodity polymers, but he has also covered olefins, aromatics, and intermediate chemicals used in polyurethanes. Moore returned to the United States in 2016 after working overseas for 10 years in Asia and Europe and has been responsible for covering the North American polyolefins market since 2017.

ICIS, a division of RELX, is a trusted source of global commodity intelligence for the energy, chemical, and fertilizer industries. The firm helps businesses make strategic decisions, mitigate risk, improve productivity, and capitalize on new opportunities through a global team of more than 600 experts. RELX is a global provider of information-based analytics and decision tools for professional and business customers. The group serves customers in more than 180 countries and has offices in about 40 countries. It employs more than 33,000 people, over 40% of whom are based in North America.