AFPM '13: US PP, PE buyers see divergent pricing heading into Q2

22 March 2013 23:00  [Source: ICIS news]

HOUSTON (ICIS)--US polyethylene (PE) and polypropylene (PP) buyers are seeing divergent pricing heading into the second quarter, after both markets saw price increases in the first few months of the year, sources said this week heading into the American Fuel & Petrochemical Manufacturers (AFPM) International Petrochemical Conference.

In the PE market, prices increased by 5 cents/lb ($110/tonne, €85/tonne) in January for all grades, and by an additional 4 cents/lb for most high density polyethylene (HDPE) grades in February. Market participants are still negotiating a 4 cent/lb increase for film grades for March, with most market participants expecting the increase to stick.

In addition to those increases, producers are pushing for an additional 4 cent/lb increase for April contracts. If all the increases were implemented, it would mean prices had risen by 13 cents/lb in the first four months of the year. 

The increases have been based on low producer inventory levels after a record two months of exports in December and January, as well as high spot ethylene prices. The additional increase for April is based on the number of planned cracker turnarounds scheduled in April and May, which are expected to further reduce supply levels in the market.

However, with global PE prices falling, some market participants have said it may be tough for producers to push through the additional increases in March and April. And while domestic demand has been described as steady to slightly higher than in 2012, export demand has been waning in recent weeks, with US prices higher than global prices, traders have said.

In the PP market, prices rose by 21.5 cents/lb over January and February, but dropped by 6 cents/lb in March, beginning what many market participants predict will be a steady slide through the second quarter of the year. PP prices rose during the first two months along with feedstock propylene, which was pushed higher, based on planned and unplanned outages in the market.

The PP price hikes have hurt domestic demand, with many buyers cancelling all but minimum volumes, based on expectations that prices will be falling in April and May. Producer inventories grew by more than 100m lb (45,000 tonnes) in February, with more expected to build in March.

Even before the 6 cent/lb March price reduction, spot prices for PP were heard below contract levels, with some spot prices heard in the mid 70s cents/lb range. Buyers are picking up extra cars in the spot market to carry them through until April or May, when PP prices are expected to begin to approach the bottom of the market.

Many market participants have said they expect a reduction of as much as 8-10 cents/lb in April prices, with some others saying they expect that amount to come out over two months in April and May.

AFPM begins on Sunday and lasts through Tuesday in San Antonio, Texas.

($1 = €0.77)

By: Michelle Klump
+1 713 525 2653



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