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Polypropylene Plastic Resin

The Polypropylene market made its big move during the first quarter of 2004, rising about 9-10 cents in both the spot and contract market. Since then, offers for good railcars have maintained their levels in the high 30s and low 40s with copolymer trading about $.02/lb higher than homopolymer. Spot trading was very active in May, and late buying has bid the market back up to season highs.

After firming the last 2 weeks of April, the market paused in early May. The spot market was well supplied with good offgrade and generic prime resin and prices retreated slightly, as buyers were content to just watch the market develop. Then Crude oil made record highs and a price increase was nominated for propylene monomer so the resin market began to heat up. Towards the end of the month, as price protection was burning off on the remaining $.04/lb Polypropylene resin price increase, aggressive buying came in to push spot prices 2-3 cents higher.

Tremendous worldwide demand for oil, particularly from China, on top of a $6-8 war premium, has pushed Crude oil prices to record highs. Even at prices well above $2/gallon, US Gasoline usage is still very strong. This competitive demand diverts potential propylene supplies to be refined for gasoline rather than used for manufacturing polymers. It is just added pressure keeping Propylene prices elevated in the low 30s.

Even though imports of plastics goods have wreaked havoc on certain segments of the US plastics industry, other sections have been defended by the shear dimension of the finished product. While it is very efficient to ship PE film/bags in a container because of the very high density of the film, other products, like caps/closures and large houseware products are often inefficient to ship because one ends up shipping lots of air. This has leant a certain level of protection to these markets by reducing potential competitive imported products and has instead allowed US manufactures of such goods to be more in control of their market and pass along increased raw material costs.

At the moment, the polypropylene market is in a healthier state than the PE market. Resin producers have been able to pass along higher feedstock costs to the processor and since resin prices have consolidated at this relatively high level, it has compelled PP processors to also pass along the higher costs to their customers of finished goods. It appears that margin is intact though the supply chain.

While demand has been excellent, it will be interesting to see if polypropylene usage is really that good, or if much of the buying in May was from large processors buying ahead of the increase taking effect. Either way, it has been an endorsement of the current price level and we will keep you posted.

Polystyrene

Polystyrene prices were stable in mid-high 50s during the first half of May, but then continued their trek higher as the month advanced. Buyers have been holding out as long as possible before making their purchases, waiting for price relief that just does not arrive. However, prices are now on the rise again.

Feedstock pressures are pushing PS producers to remove the $.04/lb TVA that they gave on their May price increase and are now implementing it in June. To show that they are serious, producers have backed this up with another $.03/lb increase announced for July.

The spot market remains tightly supplied as producers are still mostly allocating production only to forecasted orders.

Benzene prices have made another move higher, now around $2.60/gal and styrene monomer is in the low 40s. To add to the supply pressure, a PS plant in Illinois was struck by lightning and has lead to a force majeure situation. Demand is suffering at these price levels, but feedstock costs and production issues will keep the market firm for now.