BOSTON - Based on built-up downstream inventories, expected lower ethylene prices and a coming adjustment in demand, polyethylene prices are coming down, said Fred Peterson, president of Probe Economics Inc. ``The fundamentals are there for a significant decline in ethylene because we just don't think that the ultimate shortage is here yet,'' Peterson said.
Peterson spoke at a May 10 resin pricing update duringANTEC '95, held May 8-11 in Boston. He admitted his view could be termed controversial.
Probe, of Millwood, N.Y., studies the impact of inventory - which Peterson said has built up during the recent period of PE price hikes. That inventory could soften resin pricing.
``We expect PE prices to come back down again, because of the fact that the margins have probably gotten a bit higher than are supportable by the market, and we expect ethylene to fall,'' Peterson said.
He said 1994 hikes were fueled in part by unusual events, such as explosions, fires and floods.
Another speaker, Dan Rutherford, marketing manager of Unipol polymers at Union Carbide Corp. in Danbury, Conn., said PE demand should be strong worldwide, at an average annual growth rate of 4 percent for the next decade. Fastest growth should come in the Asian-Pacific region and Latin America, areas which do not consume much PE.
Growth in the United States, Canada and Europe should more closely track gross domestic products, he said.
Noting that PE is the largest-volume commodity resin, Rutherford said, ``It's amazing that we can have that growth rate on such a huge base.''
Commenting on another trend, Rutherford said more PE makers want to become fully integrated into ethylene by producing the monomer in-house. Ethylene is more lucrative, he said.
``In almost every plastic business cycle the highest margins reside with the ethylene producers. But it does not reside with the PE producer.''