ATLANTA - Polyethylene prices should drop slightly this year, only to rise in the autumn and remain above 40 cents per pound for several years. Plastics industry analyst William Kuhlke gave that assessment at the Packaging Strategies '95 conference, held April 19-21 in Atlanta.
Kuhlke, president of Houston-based Kuhlke & Associates, speaking to the packaging industry audience, predicted U.S. prices for polypropylene will continue to rise and remain high for several years. He said he expects polystyrene prices to rise only slightly to keep ahead of styrene monomer prices, and then to maintain an adequate price spread.
``If they rise too high, imports could become a factor in the U.S. market,'' Kuhlke said. ``We expect steam cracker expansions to be announced this year to increase the supply of base chemicals, and we are looking for construction of several new plants to be announced this year in all three polymers.''
Kuhlke blamed the steady 1994 price increase on the escalation in prices for ethylene, propylene and styrene monomers, caused, in part, by loss of supply due to cracker explosions, fires and floods.
Production problems caused a loss of 1.4 billion pounds of the total 48.5 billion-pound-per-year U.S. ethylene production capacity, he said.
``Now some new capacity is coming on-line by Union Carbide [Corp.], Formosa [Plastics Corp. USA], and Montell [Polyolefins], which may allow producers to become aggressive in the marketplace,'' he said. ``This, coupled with ethylene capacity returning to normal levels, should keep prices stable for the next year or so.''
Those forces also affected the markets for PET, the highest-growth packaging material, said Keith Mitchell, director of PCI Ltd. of Leatherhead, England, a worldwide packaging materials consultancy. Mitchell said any growth in the use of PET in 1995 will be tied directly to possible increases in resin production.
``What is crucial to remember, and will be seen as a major element in the 1995 supply equation, is the fact that last year's growth was only supportable by massive reduction in inventories,'' Mitchell said. ``That cannot be repeated again this year.''
He added that investment in new PET production has lagged behind the demand growth for three of the previous four years.
Mitchell said the worldwide stage for rising PET prices and tighter supplies has been set, but that U.S. PET users will be somewhat insulated because there is spare production capacity, making the United States a net exporter. As demand grows, he speculated, U.S. producers can satisfy it by reducing exports. Net importers, such as South America, Australia and Asia, will feel the tightening of supply much more.
He said alternative polyester markets, primarily for fiber, are affecting worldwide PET supply.
He estimated that 320 million to 400 million pounds of PET capacity is either being forced off stream due to shortages of raw materials, or diverted into fiber chip markets. The figure represents about 7 percent of total demand, he said, with the idled capacity being most pronounced in the Far East, which accounts for about 28 percent of total worldwide capacity.
On the positive side, Mitchell said just less than 2 billion pounds of new PET capacity is expected on-line in 1995 and 1996 in Europe, the Far East, the United States and Mexico. But that may not be on-line in time to help packaging makers this year.
Both analysts said plants producing packaging resins are operating at historically high capacity levels, and they urged packaging users and converters to look at the supply and demand picture carefully, and not be too aggressive in anticipating stabilization of resin prices.