AFPM '12: US polyolefins buyers seek lower prices after run-up

01 April 2012 16:00  [Source: ICIS news]

HOUSTON (ICIS)--US polyethylene (PE) and polypropylene (PP) buyers are looking for a respite from rising costs in the near term after dealing with double-digit price increases in both markets since the end of 2011, sources said as the International Petrochemical Conference (IPC) starts on Sunday.

In the PE market, prices have increased on average by about 11 cents/lb ($243/tonne), including a 5 cent/lb increase implemented in December 2011. Producers pointed to higher ethylene spot prices and supply tightness caused by cracker turnarounds to justify the increase in PE prices.

Some producers have said they are seeking an extra 7 cent/lb increase in April, while at least one producer has pushed that increase until May. However, many market participants say they expect a rollover or even possibly a decrease in April before prices really drop off in the second half of the year. 

Domestic demand has been relatively weak throughout the first quarter, after buyers purchased extra resin at the end of 2011 in anticipation of rising prices in 2012.

The export market has remained slow, with China buying at reduced levels for most of the first quarter. Without the relief valve of the export market to reduce inventories, supplier inventory levels will continue to grow, sources said.

Buyers say high inventories, as well as high producer margins that have risen based on low ethane prices, should be enough to keep PE prices from rising further in the near term. 

In the PP market, prices have risen by 21.5 cents/lb in the first quarter of 2012, including a 16.5 cent/lb increase in February. PP prices rose along with feedstock propylene, which was pushed higher based on refinery turnarounds, a busy cracker maintenance season and higher prices for alkylate, a gasoline blendstock. 

The PP price hikes have hurt domestic demand, causing buyers to continue to look at imported resin as well as finished goods as an alternative to paying high domestic prices.

Spot prices for PP began to emerge in mid-March at levels below the March contract price for polymer-grade propylene (PGP). Many buyers resisted the lower spot prices because they had built enough inventories at the end of 2011 to carry them through the first quarter of the year.

However, market participants took the low spot prices as a sign that PP prices could decline slightly in April, with an even larger drop off in May or June.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC continues through Tuesday in San Antonio, Texas.

By: Michelle Klump
+1 713 525 2653

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