Market Update — June 2024
Prices on the Move
At the end of May, crude settled at the lowest price since January which spurs the ongoing concerns about interest rates not dropping. This could affect overall demand in all markets. This is a time when prices are staring to ramp up as the summer travel season starts. This points to an overall slower economy and people not buying houses or taking the trips (yet) that we’d normally see. Though interestingly enough, the Memorial Day weekend had more traveling planned than we’ve seen is a long time. AAA reported that over 3.5M people flew over the weekend, which is the most since 2019, just 6 months pre-COVID.
On May 31st, the IRS added acetal to the list of plastics that are now included in the ‘Superfund Excise Tax’ (SET). If you thought it would go away sooner rather than later, we may be in for a longer haul. The SET was implemented by President Biden in 2021 as part of his Infrastructure Investment and Jobs Act.
Logistics – Interlog reports changes in costs of imports in just the last 30 days. We went from lower freight costs on imports from Asia to another wave of general rate increases (GRIs) were implemented at the start of June. This surcharge will affect origin ports across eastern Asias countries, such as China, Taiwan, Thailand, and Vietnam. We are seeing these surcharges range from 13 to 16 CPP upcharge on imports to North America. At the same time rising demand and longer vessel transits for outbound shipments from China have led to a crunch in equipment capacity at Chinese ports, notably Ningbo, Dalian, and Guangzhou.
We’ve heard about the water shortage in Mexico, and we have comments by polymer and its effects listed below.
Polymer and Market Pricing
Plastics markets – all prices are on the move! Acetal, PBT, PP, PE, PC, ABS and many others are inching up with most justifications being cash cost to produce. At the same time, soft demand means availability of supply so the majors will experience a margin squeeze if they can’t get the increases through.
PC
IHS/CMA moved PC up 1 for May coming off of April increase of 2 CPP. Sabic announced 20 cents per kg on all things PC including Lexan, Cycolac, Cycoloy, and Geloy on April 10th and implemented on shipments for May 13th. This is the second 10 CPP increase from Sabic this year. Covestro also came out with a price increase of 10 CPP in May for June 1 implementation. Their second for the year totaling 15 CPP announced. The spot markets seemed to have dried up, though prime is available, and demand is reasonable while not exceeding supply currently based on softer demand.
Covestro lead times have been pushed out a bit to 6-8 weeks for production in North America depending on what facility you’re getting material from.
ABS
IHS/CMA moved ABS pricing up 1 in April coming off a 1 CPP May increase as well. Like PC, spot markets seemed to have dried up, prime is available and demand reasonable and not exceeding supply. With two force majeures issued (Sabic and Ineos) coming out of their Mexico facilities due to a water shortage.
We are hearing that this may take three to five months to get resolved. The issue is a drought in Mexico near the Altamira area which supplies water to the Tampico site. Recall that Ineos put out a price increase of 5 CPP back on April 1st implementation.
Nylon
IHS/CMA for 6 held for May while April was flat. While 66 was flat in April and May, the most stable polymer today while it had big increases 60 to 90 days ago. Ascend came out with a $0.30/KG increase on 4.2 for 4.15 implementation. This has been the most recent in a string of increases in nylon products in the market in both 6 and 66. The water shortage issue in Mexico is causing issues for all polymer producers as listed above, including Orbria (formerly Mexichem) in the production of PVC products under the Vestolit, AlphaGary, and Wavin Pipe and Drain names. Sabic and Ineos already announced their FMs prior to this notice by Orbria.
At Star, we’re proud to bring these market updates to you in hopes that they will help you make informed decisions within the current market and industry conditions. If you hear of events in the market, please feel free to drop me an email!