Plastics Industry Perspective 2nd Quarter 2013

PP and PE supplies are tight. PP demand down, PE demand up

Plastic Perspectives Graph Q2 2013Polypropylene (PP) demand continues to drop in North America and prices remain volatile. Year to date PP prices are up approximately 5% from the beginning of the year, but PP has experienced both an approximate 23% increase and a 14% decrease in prices over separate three month periods in 2013. North American Sales of PP are down approximately 5% while exports are down approximately 40%.

Supplies are currently tight for both PP and Polyethylene (PE) due to unexpected plant outages including an explosion at a plant in Geismar, La. and an “emissions event” at a plant in Baytown, Texas.

PE prices are up approximately 10% for the year and 4% in the second quarter. Domestic sales of PE are up approximately 6% and export sales are up approximately 22%.

In 2012 export sales of PE represented approximately 20% of North American PE sales. PE producers are taking advantage of a low-cost feedstock position caused by North American shale gas. North America is going to experience a capacity expansion in PE. Current North American PE capacity is estimated at 19.4m tonnes/year and could grow an additional 5.6m tonnes/year between the years 2015 to 2017. As a result, some analyst predict by the end of the decade exports will represent 40% of all North American PE sales.

From a longer term perspective PP is expected to continue to have low demand growth and price volatility. Somewhere around 2016 propane dehydrogenation (PDH) plants are expected to come on line in North America. PDH plants will allow PP feedstock to be generated from natural gas opposed to crude oil. At that time price volatility is expected to decline and demand for North American PP is anticipated to increase. Experts believe until the PDH plants are operational, PP is going to continue to have a difficult time mainly driven by continued price volatility.

Kevin DuffyKevin Duffy is a Senior Inventory appraiser who specializes in the plastics industry. He has appraised numerous plastics-related companies in North America that are involved in distributing, compounding and manufacturing resins, films, sheets, and molds. Kevin received his B.A. in finance from Illinois State University, and passed the CPA exam in Illinois. Kevin has diverse business experience in accounting, banking, manufacturing, distribution, and retail.