Resin Price Report Update 3/2023: Prices Continue to Rise in Q1 2023 Amid Supply Chain Disruptions and High Demand
Welcome to the Resin Price Report Update for March 2023. The followings are some highlights of the report:
- Prices have remained high during this period due and is expected to remain tight in the coming months.
- Significant price increases of several types of resins.
- An overview of the world’s PET resin trade flows.
1. Resin Price Overview Q1’23
Resin prices have remained high and are expected to persist through the first quarter of 2023 due to ongoing supply chain disruptions, strong demand for plastics, and higher crude oil prices.
Polypropylene (PP) prices have risen by around 11 cents per pound in January, driven by a corresponding increase in the price of propylene monomer. Some market observers predict that prices for PP may return to being linked solely to the monomer's price trajectory, especially with the expected rebalancing and decline in the price of the monomer in February.
Despite the high resin prices, some suppliers had aimed for a 3 cents per pound hike in January for PP in addition to any monomer change. Going into February, one supplier issued a 6 cents per pound non-monomer price hike, but these non-monomer increases appeared unlikely to take hold.
2. Resin Price Fluctuation Q1’2023
2.1. PE Prices May Remain Stable
Polyethylene prices were expected to remain unchanged in January, but suppliers increased prices by 3¢/lb. Additionally, scheduled price increases for January of 5¢ to 8¢/lb were reduced to 3¢/lb and additional price hikes of 3¢ to 5¢/lb were issued for February.
Despite severe storms impacting the Houston area, spot-market buyers believed any tightening of supply would be temporary, with new capacity coming online and existing operating rates low. However, there was an exception in HDPE supply, as Ineos Polyolefins issued a force majeure in late January due to a direct tornado hit, which was expected to take several weeks to restart HDPE and PP production at La Porte, Texas.
The Plastic Exchange’s Greenberg reported that most spot PE prime and off-grade prices held firm, but only very limited numbers of prime PE railcars were available, with reduced production and record exports drawing producers' collective PE inventories to their lowest levels since October 2021.
2.2. The Recent PP Price Increase May Not Have A Significant Impact
Polypropylene prices increased by 11¢/lb in January, in line with propylene monomer, which settled at 43¢/lb. PP prices are expected to rebalance and decline in price, with the expectation that PP prices will need to be on parity with global prices.
PP spot availability is scarce, with customers having little incentive to rush ahead with orders. PP producers have exhibited production discipline the past four months, after overproducing and squandering their wide margins earned on the back of a series of weather-related force majeures in 2021.
The American Chemistry Council (ACC) revised its preliminary December data, showing that PP exports were even higher than initially reported - the second highest in seven years. In contrast, domestic sales were the lowest since March 2013. PP inventories dropped an additional 60 million lb, to more than 300 million lb below the September peak, and entered January at the lowest level in 16 months.
The key to future prices will be how PP demand shapes up, along with the impact of new resin and monomer supplies coming on stream from Heartland Polymers and ExxonMobil with new PP capacity, and Heartland and Enterprise with propylene monomer units.
2.3. There Isn't Expected To Be Much Change In PS Prices
According to PCW's Barry and RTi's Chesshier, polystyrene (PS) prices in January remained unchanged, with some upward movement expected in February and March due to volatile benzene prices. Chesshier attributed the poor demand and operating rates below 50% to low-priced imports.
Two suppliers announced price increases of 3¢/lb and 5¢/lb, which aligned with the 47¢/gal increase in February benzene contract prices of $3.58/gal. As per Barry, the implied styrene cost based on a 30% ethylene/70% benzene spot formula rose nearly 6¢/lb from late December to 42.3¢/lb going into February.
Despite costlier benzene, Chesshier said that the prices of other feedstocks such as ethylene, butadiene, and styrene monomer remained flat to lower. Chesshier expected PS prices to be flat in February and March, given the low production rates due to the significant drop in demand unless there is a significant disruption in feedstock production or an upward swing in demand.
2.4. PVC Prices Will Likely Stay The Same Or Rise Slightly
PVC prices rose slightly in January, up by around 1¢/lb, despite suppliers announcing 6¢/lb increases. Mark Kallman, RTi’s vice-president of PVC and engineering resins, and PCW senior editor Donna Todd, said that February prices were likely to remain flat or slightly higher. Suppliers had planned a new 4¢/lb increase, but buyers viewed this as overly ambitious in the current market.
The increase in January was a “defensive” move as suppliers tried to stop the price slide after great export activity in December, but domestic demand continued to slump, with operating rates below 70%, according to Kallman. The 1¢/lb increase was attributed to higher export prices. Suppliers were said to be “anxious” to recoup some of the 42¢/lb they had lost in the second half of 2022. However, buyers viewed this year’s first-quarter price initiatives as overly ambitious in light of slack demand.
2.5. PET Prices Experienced A Decrease, Increase, And Will Probably Remain The Same
RTi's Kallman has stated that PET prices experienced a 3¢ to 4¢/lb decline in December 2022 but increased by 1¢ to 2¢/lb in January 2023.
According to Kallman, the cost of feedstocks, particularly paraxylene, was responsible for the price fluctuations. He also noted that the fluctuation of paraxylene prices began after the December 2022 freeze in Texas, which halted production for some time. Kallman reported that domestic demand is still weak, with many low-cost imports entering the market, although these imports have slowed due to a decrease in domestic demand.
3. PET Resin Trade Flows
3.1. China’s Bottle-Grade PET Resin Market
Chinese bottle-grade PET exports for January and February totaled 379k and 407k tonnes, respectively, up more than 27% YoY, setting a record high for the period. Despite the rise in COVID infections in January and the Chinese Spring Festival, monthly exports increased 10% from December levels, exceeding expectations. While order intake has since weakened, prompt shipment availability is limited, and exports are projected to range between 400-450k tonnes in March and April.
Russia remained the largest destination for Chinese PET resin exports in January and February, accounting for about 61.8k tonnes, and is expected to remain a significant importer of Chinese resin in 2023. Latin American destinations such as Mexico, Colombia, and Peru, which received a combined 77.6k tonnes of Chinese PET resin exports, were also critical markets. Other vital markets for Chinese PET resin exports in early 2023 included the UAE and Nigeria, while exports to the Philippines increased by 6% to around 23k tonnes in February, with a total of over 320k tonnes exported to the Philippines in 2022.
3.2. EU Bottle-Grade PET Resin Market
Quarterly Imports
In Q4 of 2022, the EU-27 imported a total of 251k tonnes of bottle-grade PET, which was a 22% decrease from the previous quarter but still a significant 67% increase from Q4 of 2021. Despite the decline in energy costs, buyers continued to stock up on imports due to the collapse in ocean freight rates and highly competitive Asian resin prices.
China, Turkey, South Korea, Egypt, and Vietnam were the top five sources of imports, accounting for approximately 78% of total EU imports from outside the block. Although China remained the largest source of imports, the volumes decreased sharply by over 53% to 53k tonnes in Q4’22, representing 21% of total EU-27 imports in the quarter; a 180% increase in Q4’21.
Quarterly Exports
In Q4 of 2022, extra-regional EU-27 PET resin exports continued to decline as domestic European producers slashed operating rates, with a total of around 51k tonnes exported, down 4% from the previous quarter. The UK was still the largest destination for PET resin out of the EU block, followed by South Africa, Ukraine, Switzerland, and Kazakhstan.
While exports to the UK decreased by 1% to 26.8 tonnes, the volumes to South Africa increased by approximately 234% to 4.4k tonnes. For the full year of 2022, export volumes totaled 263k tonnes, representing an annual decrease of about 20%.
3.3. US Bottle-Grade PET Resin Market
Quarterly Imports
In Q4’22, the US imported 212.5k tonnes of bottle-grade PET, down 14% from the previous quarter and 12.5% from the previous year. However, for the full year of 2022, PET resin imports increased by approximately 9%. Despite the decline in Q4’22, demand is expected to improve through March, although higher inventory may dampen import levels for Q1’23. The closure of Alpek’s PET resin manufacturing operations at their smaller Cooper River site may lead to increased imports during the upcoming peak season.
Mexico, Taiwan, Oman, South Korea, and Vietnam are the origins with the highest volumes in Q3’22, but volumes from Mexico and Oman declined in Q4. Volumes from Taiwan, on the other hand, increased by 91% quarter-on-quarter. In the full 12-month period, the top four destinations all saw significant increases, with Oman and South Korea experiencing the largest annual percentage gains.
Quarterly Exports
In Q4’22, the US exported 10.3k tonnes of bottle-grade PET, a 4.5% increase from the previous quarter and a 3% increase from the previous year. For the full year of 2022, exports totaled 43.6k tonnes, up less than 1% compared to 2021 levels. The majority of export volumes in Q4’22, around 68%, remained within North America, with Canada being the largest destination.
In Q4’22, 6.3k tonnes were exported to Canada, while a smaller 700 tonnes were sent to Mexico. In 2022, over 88% of total US PET resin exports went to Canada and Mexico, equivalent to 38.5k tonnes.
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