OXYCHEM TAKING BACK PVC PRICE INCREASE

By Frank Esposito
Senior Staff Reporter

Published: November 17, 1997 6:00 am ET

Related to this story

Topics Materials, In Print, Extrusion

AKRON, OHIO—Strong resistance from PVC buyers in the pipe industry has spurred Occidental Chemical Corp. to rescind a 2 cent price increase for PVC resins, but the industry is divided on whether to follow OxyChem's lead.

Officials at Formosa Plastics Corp. USA of Livingston, N.J., and Condea Vista Co. of Houston said their firms are likely to make the same move, while Shintech Inc. of Houston and Geon Co. of Avon Lake, Ohio, said they plan to go through with increase attempts, which were effective Oct. 1 and would have been seen by most buyers in early November.

Several industry officials said buyers in the pipe market played a key role in thwarting the hike.

``There was a strong rationale for the increase, but we didn't see an increase in downstream markets,'' said a spokesman for Dallas-based OxyChem. ``It's difficult for the independent pipe producer to compete with the integrated producer when they get squeezed. All this increase would do is squeeze the independent producer, who is vital to the health of the industry downstream.''

Industry sources said integrated pipe producers like Shintech, Formosa and Westlake Group of Houston had not raised prices on their finished pipe products in spite of continued efforts to increase resin prices.

Charlie Matson, PVC sales manager for Condea Vista, said he agrees with the reasoning behind Occidental's decision but not with the timing.

``Most pipe producers don't increase the price of pipe until they're sure a resin price increase is going through and they've run out of lower-priced inventory,'' Matson said. ``I could see [Occidental] running this later, but not on the 10th of the month.''

Geon resin sales director Barry Hendrix said his firm plans to proceed with the increase while watching the market. Shintech controller Dick Mason said his company also is staying the course.

``It's a little early in the month to tell what's going to shake out or not,'' Mason said.

PVC makers may have contributed to the resistance seen in the pipe market, Matson said.

``When a price increase falls apart, pipe producers who had taken the increase lose orders to those who had stayed at the lower price,'' he said. ``We've burned them somewhat.''

Led by Shintech, many PVC makers had announced price increases of 2 cents for Oct. 1, and 1 cent each for Nov. 1 and Dec. 1. Occidental, however, had announced only the initial 2 cent increase for Oct. 1.

Tom Stevning, Formosa's business director for PVC resins, said the current market situation goes beyond the influence of integrated companies.

``It's wrong to say it's only the fault of the integrated pipe companies,'' Stevning said. ``Some major independent pipe makers who don't have a direct relation to a resin manufacturer can have the same effect.''

Stevning added that conditions at Formosa are backing up the increase attempt, as the company had a record sales month in October and is seeing inventory levels that are lower than what it likes to see for this time of year.

Prices for pipe-grade and general-purpose/injection PVC grades have dropped an average of 4 cents since midsummer, partially because of an earlier-than-expected drop in housing starts that affected the construction market.

PVC buyers throughout the United States reported that the increase had not gone through.

An executive at an Ohio pipe and profile maker described the increase attempt as ``sheer folly.''

``They're trying to use [the increase attempt] as a means of keeping prices where they are,'' the executive said. ``I don't think the demand's there. I don't see the integrated pipe companies raising their prices, and that's got a lot to do with it.''


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OXYCHEM TAKING BACK PVC PRICE INCREASE

By Frank Esposito
Senior Staff Reporter

Published: November 17, 1997 6:00 am ET

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