Market Update — July 2024

Home Sales Down While Engineering Resins Prices Up

The overall economy is still a bit sluggish. A recent newspaper article reported new home sales reaching a YTD low.

New home sales reach 6-month low in May

WASHINGTON – Sales of new U.S. single-family homes dropped to a six-month low in May as a jump in mortgage rates weighed on demand, offering more evidence that the housing market recovery was faltering. New home sales declined 11.3% to a seasonally adjusted annual rate of 619,000 units last month, the lowest since November, the Commerce Department’s Census Bureau said Wednesday. The sales pace for April was revised higher to 698,000 units from a previously reported 634,000 units. Economists polled by Reuters had forecast new home sales, which account for more than 10% of U.S. home sales, edging to a rate of 640,000 units. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales slumped 16.5% on a year-on-year basis in May. The housing market has hit a soft patch, with the resurgence in mortgage rates also undercutting previously owned home sales and home building. Residential investment posted double-digit growth in the first quarter. The average rate on the popular 30-year fixed mortgage hit a six-month high of 7.22% in early May before retreating to 7.03% by the end of the month, data from mortgage finance agency Freddie Mac showed. Sales plunged 43.8% in the Northeast and slipped 4.5% in the West. They plummeted 12.0% in the densely populated South and decreased 8.6% in the Midwest, which is viewed as a more affordable region. The median new house price fell 0.9% to $417,400 in May from a year ago. Nearly half of the new homes sold last month were priced under $399,000. A survey from the National Association of Homebuilders last week showed the share of builders cutting prices to bolster sales in June was the highest in five months. Builders are constructing smaller homes to try and fit homebuyers’ budgets. National house prices are, however, rising. The Federal Housing Finance Agency reported on Tuesday that single-family home prices increased 6.3% year-on-year in.There were 481,000 new homes on the market at the end of May, up from 474,000 in April, the report showed.

The Perc Report published this past week, and key notes were:

The Electronics and appliances retailers experienced weaker monthly sales growth of 0.4% in May, following April’s 2.5% increase. The Industrial Production Index for plastics produce manufacturing increased by 0.7% in May M/M, marking the fourth consecutive month of growth. U.S. imports of plastics products from China totaled $1.3 billion in April, a 0.4% increase from March but a 7.7% decrease from April last year.

Pricing:
It’s all about the market increases which I am seeing for most every polymer in the market. This past month, we have seen most every type of polymer moving upward based on cash costs. A few examples are:

BASF on June 7 announced: Effective June 15, 2024, or as contracts allow, BASF will increase prices for the following products in North America:

• Ultramid®, Technyl® and Capron® (PA6 compounds) $0.12/lb
• Ultramid and Technyl (PA66 compounds) $0.15/lb
• Nypel® (PA6 and PA66 compounds) $0.12/lb

And higher increases for some compounded grades may be required.

Polymer Resources announced a price increase on June 4 for July 1 implementation of: PC, ABS, ASA, PCABS, PCASA, and Nylon grades of 12 CPP. PBT and PC/TP grades were up 10 CPP and PPX grades up 8 CPP.

Plaskolite announced that their acrylic is also on the move by raising all materials by 5 CPP for July 22nd. This is on top of the 12 CPP they announced on April 25th.

Celanese announced at the end of May, an increase on acetal sold in China by 30 Cents/KG.

ExxonMobil Canada and NA @ 5CPP increase for July 1 on the PE lines that they offer. Coming off the
3 CPP increase from June 1.

LYB (Equistar) PE increase of 5 CPP for July 1 for PE coming off their 3 CPP increase in June.

The Mexico Drought:

June 20th and tropical storm Alberto helped the drought situation that affected so many people and businesses in the region. While FMs are still in place, below are some of the key players that were
affected. In summary:

On May 22, authorities in Mexico halted water supplies to at least 74 industrial sites and eight petrochemical plants to conserve water for drinking and personal use. Every major petrochemical producer that has a location in NE Mexico is affected by the drought and declaring FM. (more details below). The region’s rainy season starts now and goes through fall. Right now, the region has inadequate rainfall, extremely high temperatures, and drier than typical weather conditions for this time of year.A few of the major producers which are affected work in markets such as automotive, electronics, and medical devices. Be prepared for shortages coming at us on finished parts.

1.  Celanese Corp. has placed force majeure sales limits on plastics feedstocks acetic acid and vinyl acetate monomer (VAM). The action affects sales of those materials in the Western Hemisphere, officials with Dallas-based Celanese said in a news release. Acetic acid is used to make acetal resins and also is a primary ingredient in vinegar production. VAM can be used to make polyvinyl acetate (PVA) and other specialty resins. Celanese expects its second quarter U.S. Gulf Coast production of acetic acid and VAM to bedown 15-20 percent “as a result of these temporary challenges which we are still navigating,” said Mark Murray, acetal senior vice president.
2.  Sabic declared their FM on May 28th for their Altamira facility which produces polycarbonate, ABS and acrylic resins.
3.  Cabot Corporation also declared a FM ~ June 14th based on the water shortage in Altamira. They are a global supplier of specialty MB, carbons and specialty compounds.
4. Ineos declared FM on the ABS production on May 20th. This is for their Terluran ABS, Novodur high heat ABS, and Luran ASA

All that being said – Tropical storm Alberto came through late June and gave some relief to the region. There are 7 dams that need to be at no less than 50% capacity to resume normal operations. On June 21st, of the 7, one was at 56% while the other 6 were 37% or less after the weather event.

Albertos rain continued to fill those other reservoirs and Ineos Altamira and Sabic Tampico are starting back up and expect finished product to be produced by mid-July.

Covestro and ADNOC-

One day after announcing it has entered into “concrete negotiations” for acquisition by Abu Dhabi National Oil Co. (ADNOC), Covestro said it wants to save 400 million euros ($427 million) in material and personnel costs globally by 2028 reported Plastics Newson 6.27.24. Most of the cuts would involve
Corporate HQ in Germany.

Once this deal is completed, Covestro and SABIC, together, will control ~38% of PC capacity worldwide at the end of the year.

Freight:

Last month, we put information out about the General Rate Increases (GRIs) on imports from Asia. These surcharges will affect origin ports across eastern Asian 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.

Chang Chun Plastics announced an increase based on the GRIs for freight coming from Asia to North America for the 3rd quarter. Though they didn’t announce what the increase may be looking forward. Isuspect that this will be the first of many importers with   increases coming our way.