Resin Price Report: Ineos Declares Force Majeure on Polypropylene Production

An above-average volume of material changed hands across the PlasticsExchange trading platform last week, with a good balance between polyethylene (PE) and polypropylene (PP). Activity was spurred by an Arctic blast that brought frigid temperatures down through the United States and into Houston. Remembering the devastating deep freezes of February 2021, and to a lesser extent December 2022, petrochemical companies instituted precautionary protocols that affected monomer and resin production, but also helped to minimize severe weather-related damages, reports the PlasticsExchange in its Market Update.

Mechanical failures at Ineos complex

The port of Houston was temporarily shut, backing up shipments. A number of plants experienced seemingly minor equipment issues and production outages. One force majeure did emerge on Jan. 18, declared by Ineos on its PP resin produced at the huge Chocolate Bayou Petrochemical complex in Alvin, TX. This came in response to mechanical failures, but Ineos did not provide any details on the nature or extent of the issues, according to ChemAnalyst. “This recent development follows a prior incident on January 14, where Ineos took measures to reduce the load on olefin production at the Chocolate Bayou site. The decision was prompted by cold weather conditions prevailing in the region, illustrating the vulnerability of industrial operations to climatic fluctuations,” reports ChemAnalyst. The plant makes ethylene and propylene and has an annual PP production capacity of around one billion pounds.

PE producers implement $0.05/lb increase on January contracts

Although producers entered 2024 with more than ample inventories of PE and PP resin, stronger market conditions have emboldened PE producers to implement a $0.05/lb increase for January contracts. Fresh nickel nominations for February are starting to percolate, as well. The Houston freeze exacerbated the polymer-grade propylene (PGP) shortage, and spot monomer prices advanced another $0.025/lb, setting up for an imminent cost-push PP increase currently targeting $0.04 to 0.05/lb, according to the PlasticsExchange.

The export market remained hot, as shipping disruptions in both the Red Sea and Panama Canal have displaced supply from intended demand, while ocean freight rates have been spiraling higher, supporting regional resin markets. A flurry of international resin requests flowed in for incremental/substitute resin from the United States, but price expectations need to adjust higher to grab the attention of US suppliers. Several US producers have already sold out their January export allotments, although they could be enticed to release more given the right incentives, said the PlasticsExchange.

PE market activity continued to ramp up past mid-month. Transactions were focused on high-density PE Blow Mold and Injection as well as linear-low-density PE Film grades. The vast majority of PE plants skated through the Houston freeze without a notable impact. Most of the prime PE grades at the PlasticsExchange picked up another half-penny and sit one to two cents higher so far this year. A steady flow of off-grade railcars rolled through, some at a meaningful discount. PE producers have been disciplined with their Prime railcar offerings into the spot market to encourage contract purchases as they push for a January increase. At least one producer has proposed another $0.05/lb price increase for February, and others are expected to follow suit after this past week’s weather event.

PE exports remained strong, but will likely fall short of the record tally seen in December, especially since the weather forced the closure of packaging warehouses and the port, and the coming Lunar New Year, which begins on Feb. 10.

Prime PP prices move higher

PP trading stayed healthy throughout the week. Prime PP prices moved another cent higher at the PlasticsExchange amid ongoing propane dehydrogenation (PDH) unit  outages alongside a fresh PP force majeure from Ineos, but resin demand has been soft.

As has been seen in other cost-push increase markets, it has been a challenge for PP prices to keep up with rising PGP costs. Spot PP levels at the PlasticsExchange have risen three cents so far in January, while spot monomer has run up about eight cents, so there has been some margin compression.

While prime railcars have been available, processors are pushing back to procure railcars that start with a seven and they remain hopeful that they can hold out long enough to avoid high-volume purchases near peak pricing. Producers are keen to rebuild margins, but they entered January collectively with record inventories, so resin reactors are expected to throttle back even more, according to the PlasticsExchange. As such, a hefty flow of rougher off grade and transitional railcars are showing up, and these have been priced with a generous discount from prime. PP contracts probably will move higher in lock-step with the increase in PGP contracts, which is currently trending toward $0.04 to 0.05/lb.

Read the full Market Update on the PlasticsExchange website.