A Look at Resin Markets

The dynamics of the resin markets can affect the demand for recycled plastics. For instance, when propylene production capacity goes offline or production of the hydrocarbon is affected by changes in raw material feedstock, recyclers and reprocesors could see more demand for their secondary polypropylene (PP).

The session, “Resin Market Dynamics,” at the Plastics Recycling Conference, organized by Resource Recycling, March 19-20 in Atlanta, addressed the forces at play in these markets.

John W. McAuley, president of Plastics Market Research Ltd., Unionville, Pa., offered his assessment of the key issues facing the North American PP industry, which hinge on the changing energy and feedstock markets in North America. The growing production and declining price of natural gas in North America has resulted in a further displacement of crude oil in the production of virgin plastics, with McAuley noting that crude oil is four times more expensive than natural gas. When crude oil is used as a feedstock, more propylene results compared with when natural gas is used, which produces more ethylene, he said.

Therefore, the price of propylene has increased, which increases the price of PP over time, McAuley said, adding that the price of PP has exceeded pricing for HDPE (high-density polyethylene) and PS (polystyrene) since 2009. “This reduces the ability to substitute PP for these materials,” he said.

He also noted that PP demand domestically declined 5 percent in 2011, largely because of increasing prices as propylene supply decreased.

Demand growth for PE (polyethylene) exceeded that of PP in the last three to five years as the economics have been more favorable for PE production in North America, McAuley said. However, he added, PP usage would continue to grow because it was the best solution in some cases.

Steve Ates, managing director of SBA-CCI Inc., Ocean Springs, Miss., addressed trends affecting polyester production and consumption, saying he expected a growth rate of 4.6 percent year over year for polyester fiber in 2012.

While a cotton shortage was a boon to polyester and recycled PET (polyethylene terephthalate) demand and pricing a year ago, that is no longer the case. While the cotton supply has increased, demand has declined, and Ates predicted that cotton would not have an effect on polyester pricing in the near term.

He also said he foresaw tightness in PET resin capacity in the U.S. in the next few years, noting that new capacity was not due to come online in the country until 2014.

While the PX (paraxylene) supply chain is tight, Ates said PTA (purified terephthalic acid) is oversupplied in all regions.

Howard Rappaport, Houston-based senior director of global plastics at IHS Chemical, addressed PE production and demand. He said while the shift to natural gas in the production of plastics has benefitted some plastics, such as PE and alpha olefins, and to a lesser degree vinyls and styrenes, it had negatively affected butadiene, rubber and latex.

Rappaport predicted a renaissance in ethylene capacity in North America in the next three years as well as overcapacity in China in the near future.
 

(Additional information about secondary plastics, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)