U.S. resin prices seen moving lower in 2023

U.S. plastic resin prices appear set to move closer in what is left of 2023 to lower prices elsewhere in the world, particularly after the North American market started to feel the full impact of plants started in recent months, a market analyst for polymers said in an interview.

Image courtesy of Pasja1000

“The potential for a recession plus an increase in the need for exports, particularly polyethylene, are going to work together to help reduce the price” in what is left of the year, said an expert on the North American plastic resins commodities market, Esteban Sagel, in a recent interview.

While some producers are currently seeking price increases in their contracts, such price increases in resin supply contracts for polyethylene or polypropylene would be hard to justify “particularly on a market where domestic demand is not so strong,” Sagel added.

Executives from several companies have voiced concern about demand.

U.S. polyethylene prices

“So right now polyethylene prices, depending on the grade, are in the mid 60s cents per pound and polypropylene is in the higher 60s or 70s,” he said in an interview near the end of March.

There are recent polyethylene startups in the U.S., with Shell in Pennsylvania and Bayport Polymers in Texas, as well as by NOVA in Ontario in June 2023, he said. Nova completed mechanical construction in Ontario in late 2022. However, after these plants, the next project completion will only be in 2026, he added.  

“We have a project in Canada for Nova chemicals for linear PE, then we have Shell just started in late 2022. Then Chevron Phillips and Qatar Petroleum have a very large project planned for early 2026,” he added.

Polyethylene projects

Sagel mentioned Dow´s plans to possibly expand existing capacity in Alberta. Dow has yet to confirm a project in Alberta to expand its polymers production capacity there. An FID had been expected by the end of 2022 but talks with local authorities continue with a decision anticipated before the end of the year, the company has said.

“Dow Chemical has a very large project in Canada for 2030 and Formosa of course they had a project for Louisiana that had its air permits pulled by a judge in late 2022 but the State of Louisiana is fighting the ruling (…and) it may come to production sometime in 2027; and, finally, Sabic was talking about potential investments in Port Arthur (Texas) as well, so we have about 5.6 million tonnes of additional capacity projects between 2023 and 2030,” he said.

Those estimates for planned added capacity do not include any potential new capacity from Thailand-based PTTGC in Ohio.

“The company (PTTGC) says they are still committed to do the project but they are looking for partners, a difficult thing in this type of environment: investing when you are in a margin downturn,” he said.

PTTGC has yet to announce an FID and for the past couple of years it has been looking for a company to replace a former partner that left. The Ohio project was at one point seen as similar in size to that of Pennsylvania, that is, with production capacity of 1.6  million tonnes per year.

The North American polyethylene market

“In North America, this is in the U.S. and Canada, not including Mexico, capacity is about 33 million tonnes per year for all grades so this is high, low, and linear low density polyethylene. Domestic demand is about 15.4 million tonnes, about half of the existing capacity, this 2022, in rough numbers,” Sagel said.

The difference between production and demand is what North American producers need to export to find a balance in the market, he explained.

Polyethylene exports have reached about a million tonnes per month but they were stuck at that level and they need to increase, Sagel said.

If we have 33 million tonnes of capacity and you are only consuming about 15 million tonnes, you need to export 15 to 18 million tonnes to run your plants fully out; right now, we export about 12 million metric tonnes per year, more or less,” Sagel said.

Even as shipping constraints are easing and despite producers apparently willing to increase exports, finding markets for the new resin production has not been easy.

“Logistics is not the biggest issue. The problem is more with what is going on in the rest of the world; so, the same economic conditions that you have in the U.S.,you have them in China, (..) Europe (…),” he said.

Polypropylene market fundamentals

In North America, “we have a 9.4 million tonnes of capacity for PP production, this is U.S. and Canada, and consumption is about 7.2 million tonnes. The balance is exports, and most of those go to Mexico,” Sagel said.

“We have two new plants, ExxonMobil (in Louisiana) and we also have a Canadian producer (InterPipeline) and what this is doing is making up some of the production losses that we had,” he said. The previous capacity addition for polypropylene had been a plant started by Braskem in Texas in 2021.  

“These plants I think are going to be mainly directed toward the domestic market and are going to help decrease the tightness that we had up until now on the polypropylene market,” Sagel added.

By Renzo Pipoli