Plastic Recycling in the USA / China Markets: May 2011

The price of prime Caprolactam continues to soften in the Asian market. Last week Capro was selling in China in the $3320/MT price range and falling. The USA Capro suppliers (Honeywell / BASF) are trying to maintain the price at $3500/MT for their material, but the China Capro producers are being much more aggressive in leading the Capro price reductions. Most of our Nylon 6 buyers (compounders and end users) have stopped buying resin, and are running their plants on lower cost old inventory that is in the warehouse. Any Capro or Nylon 6 (PA6) price increases at this time are being driven by the China traders/brokers on the supply side, because today’s price increases are not based on true demand. Most materials buyers feel these markets will continue to soften, and will stay out of the Capro and PA6 market as long as their old inventory will allow. Over the past week we have watched PA6 drop in price by about $.01 ($22/MT) per day, and it looks like this trend will continue in the short run.

The Nylon 66 (PA 66) market is also starting to show signs of price softening in China, but not to the same extent as the Capro and PA 6 price decreases. PA 66 is a much tighter market on the supply side, so it probably won’t see the weekly price decreases that are being seen in the PA 6 market. Most of our customers feel that all material prices have gotten out of hand, and they can no longer pass them on to the end product and consumers. I think that PA 66 prices will stabilize before the price of PA 6 due to a tighter supply of the material in the world market. I will not guess where either material, PA 66 or PA 6, is going to bottom out, but the current slowdown in the China market will definitely have its impact on both materials and continue to drive down prices in the short run.

We see material prices continue to head up in both the domestic and China Acrylic (PMMA) markets, which will not be helped by the recent flooding on the Mississippi and Ohio rivers. Lucite has declared force majeure in the MMA market due to this recent flooding, because of their inability to move MMA monomer barges up both rivers to their customers due to the high water. I understand that the flooding has had a negative impact on the styrene monomer market, which has lead to Ineos declaring force majeure in the polystyrene market late last week. I am not sure if this is going to drive up material prices for PMMA or PS in the short run, because these should be temporary feedstock supply disruptions that will go away once the water level gets back to normal on the Mississippi and Ohio rivers.

The domestic ABS market appears to be sold out through June, and most of the USA suppliers are now taking orders for July. The crazy part is that you have to get your orders in now for July shipments, but the suppliers cannot tell the buyers where the price for material will be when they ship the car of ABS to the warehouse for packaging. It is basically order now, and you will be billed at the July market price that will be determined for ABS in mid-June.

When are the material price increases for plastic going to stop? Today it is any ones guess.

I think that most plastic materials have reached their peak in pricing, and should start to show signs of softening as we move into the summer months. The public warehouse that we use in Houston, TX, mainly loads export containers for Formosa Plastics, and they have not loaded a single export container of either PE or PP since the first of April. Olefin inventories are starting to back up in the Houston packaging warehouses, because the domestic producers have priced themselves out of the Asian export market. The ABS producers will start building excess inventories as well as we move into the summer months, because of the slow housing market and decreased demand from DWV pipe producers.

Here is where we pricing for the following materials the week of May 16, 2011. These are material buying prices for TL or larger quantities from the large plastic resellers / brokers.

ABS Wide-spec pellets (3 Melt / 3 Izod - low gloss) $1.20+/lb.

ABS Prime Pellets $1.35+/lb.

SAN Wide-spec pellets (w/black specs) $.90/lb.

SAN Wide-spec pellets (good color) $.96-.98//lb.

SAN Prime pellets $1.30+/lb.

PC/ABS Black Wide-spec pellets $.92-.95/lb.

PC/ABS Black reprocessed pellets $.82-.85/lb.

PP Homo Prime Railcars $1.14+/lb.

PP Homo Prime truck loads $1.25+/lb.

LDPE Wide-spec truck loads $.85-.90/lb.

LDPE Prime $1.10+/lb.

HDPE Blow Molding Grade $.80-.83/lb.