Weak demand drops prices for suspension PVC, solid PS

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Average per-pound selling prices dropped for suspension PVC and solid polystyrene in June as demand remained relatively weak.

Suspension PVC prices slipped by an average of 1 cent per pound, while solid PS prices dipped 2 cents per pound on average, according to several resin buyers and suppliers contacted recently.

``Volume is down, the Southeast and Northeast [United States] are underwater, plants are running at half capacity and everyone's got their 4th of July shutdowns coming up,'' a major Midwestern PVC buyer said. ``[PVC] producers should be glad prices are only down a penny.''

Heavy rains and generally wet weather in the regions the buyer mentioned have slowed construction business, which is the major driver of the North American PVC market via its use of PVC pipe, siding, doors and windows. As a result, many PVC pipe makers and profile extruders have fuller inventories of both pipe and resin than they normally would this time of year, and that's impacting their resin buying.

``It's not so much that there's all this [PVC] resin sitting around, it's that people are waiting until the last minute to buy because they think the price is going down,'' another Midwestern PVC buyer said.

``There was downward price pressure in June, but sales for the month improved from May,'' an executive with a PVC producer said. ``Customers are looking for price relief, but there are some encouraging signs in the market.''

One of those signs - at least in the first four months of 2003 - may have been sales into the dominant rigid pipe and tubing market. Sales into that segment were up more than 2 percent through April, even as total U.S./Canadian sales dropped more than 3 percent and domestic sales dropped more than 2 percent, according to the American Plastics Council in Arlington, Va.

But that growth was tempered by drops of sales into siding and extruded windows and doors, each of which were down more than 5 percent.

For their part, leading PVC makers Shintech Inc. of Houston and Oxy Vinyls LP of Dallas are attempting to reverse the slide by announcing price increases of 2 cents a pound effective Aug. 1.

Profit concerns led Oxy Vinyls and its parent firm Occidental Chemical Corp. to undergo a ``significant restructuring'' in late June that resulted in the loss of more than 100 jobs throughout the company, several contacts said. It was unclear how many of those jobs impacted Oxy Vinyls directly, although one source said some North American PVC sales jobs were eliminated.

On the production front, PVC makers were working to keep production in line with demand. Several sources reported the possibility that Shintech would restart the plant it purchased from Borden Chemicals and Plastics in Addis, La., perhaps as soon as the first quarter of 2004. But others said the market may not need more capacity at that point and that Shintech may have difficulty in sourcing raw material to operate the plant.

Even with the June drop, average selling prices for pipe-grade PVC in the United States and Canada are up almost 70 percent since early 2002, according to the Plastics News resin pricing chart.

In PS, prices dropped as buyers worked off existing inventories and coped with sluggish demand.

``[PS] suppliers are playing it very tight, but there was still a drop [in June],'' an East Coast PS buyer said. ``Material's not hard to get right now.''

Through April, U.S./Canadian PS demand was down almost 4 percent, according to APC. Most of that drop occurred in sales to resellers and distributors, which tumbled almost 26 percent.

PS sales into the market-leading food-service end market were up more than 6 percent through April, although sales into food packaging were down more than 4 percent.

``There's been significant inventory reduction in the [PS] chain,'' an executive with a major PS maker said. ``In April, we had the highest cost of raw material and [resin] prices were still going up, so people stopped buying. But they've been slowly coming back in May and June.''

Industry watchers said they do not expect much impact from the June 11 fire and explosion that knocked out Nova Chemicals Corp.'s styrene monomer facility in Pasadena, Texas. At the time, Nova said the site could be closed for as long as 40 days because of the incident, which occurred during the restart of a furnace in the plant's ethylbenzene production area.

Ethylbenzene is used to make styrene monomer, which is a key feedstock in PS production.

Nova, which ranks as North America's largest PS maker, saw its styrenics unit post a loss of $17 million in the first quarter even though sales climbed almost 40 percent to $386 million. Sky-high natural gas prices took a toll on Nova's overall profit.

Nova's styrenics unit, which includes solid and expandable PS as well as styrene monomer, had lost $39 million in the first quarter of 2002.

After the 2 cent dip, average U.S./Canadian selling prices for injection molding grades of high-impact PS are up almost 40 percent since the start of 2002, according to the Plastics News resin pricing chart.

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