Less feedstock volatility is expected to usher in more stable pricing in the US polyolefins sector in 2013, while economic uncertainties are dampening sentiment about improved demand in the coming year, as per ICIS.
Most participants in the US polyethylene (PE) and polypropylene (PP) markets are confident that both industries will see some growth in 2013. However, predictions for the coming year range from growth in line with the nation's GDP, to improvement of as much as 3-4% over 2012. Expectations of a strong Q1-2013 are based, in part, on a relatively weak fourth-quarter of 2012. In both sectors, domestic demand has been weak, as buyers avoided building inventory in the last months of the year. In the PE sector, the weak demand caused prices to drop in November, with some predicting an additional drop in December. Most producers have announced a 5 cent/lb increase for 1 January. Hence, the markets will gain as buyers replenish. Demand is anticipated to improve enough in January to drive the prices higher. Buyers were less confident in the increase, saying they expect flat pricing until at least February, when they agree prices will likely increase.
In the PP sector, buyers are also bracing for a price increase in the first quarter. However, sources said they do not expect to see the huge price spikes and drops that were seen in 2012, starting with a 16.5 cent/lb increase in February of that year.
One factor that is expected to reduce volatility in both the PE and PP sectors is the fact that there are fewer planned turnarounds announced for Q1 '13 than there were in the same period in 2012. Another factor that market participants say will eventually improve demand in both the PE and PP markets is the potential for low-cost feedstocks to bring manufacturing back to the US.