If pricing announcements were earthquakes, a late-June announcement from Huntsman Chemical Corp. registered a mere ``2'' on the Richter scale. Huntsman rescinded a 3 cent-per-pound price increase for polypropylene that was to be effective June 1.
The company's announcement caused anxiety and a pensive attitude in the market - just as a minor tremor before a big earthquake might - but it did not cause any structural damage.
Many industry executives said last week they were adopting a wait-and-see attitude toward the market, while consultants scurried to figure out how Huntsman's announcement would affect everyone else.
Everyone seems to be waiting for the proverbial ``Big One.''
Huntsman, a Salt Lake City-based corporation whose PP operations are based in Woodbury, N.J., said it canceled its price increase because the forecasts on which the increase was based did not come true.
Brad Jones, vice president for sales and marketing for Huntsman's PP business, said in a July 5 interview by telephone from his office in Woodbury that his company's forecasts indicated propylene monomer prices would increase in May and June. However, monomer prices remained stable.
``The original data that seemed to justify the increases in May changed,'' Jones said.
Separately, analysts noted that Huntsman is a leading supplier of PP homopolymer fiber products to the carpet industry, and that demand from the carpet industry fell off significantly after housing starts declined in the early spring.
Analysts said they believe Huntsman's move to limit price increases might affect only the markets for homopolymer resins, which have fallen more sharply than markets for copolymer PP resins.
Markets for copolymers remain strong, and several industry executives whose companies make those resins said last week they expected to keep - and enforce - their announced in-creases. In copolymers, producers have increases pending of 3 or 2 cents per pound.
Several analysts noted that additional production capacity for copolymer is to be put into production later this year, making them believe that pricing for copolymer resins will only become more competitive.
Executives also said the Independence Day holiday dampened market activity, and that they expect July sales to be seasonally slow.
While several analysts said they viewed Huntsman's move as jockeying for a better position in the market, Ken Dowd sees it differently.
The president of Dowd & Associates, a Wilmington, Del., consulting firm, said that, while pricing decisions and the market are complex, he believes Huntsman and other PP producers are acting to enhance short-term profit. He suggested they are making pricing decisions based on short-term inventory levels.
Many people have been predicting in the past few months that the market will turn around from the strong level of sales seen in the past 15 months, and the fall-off in homopolymer resin sales appears to some to be an early indicator of that turnaround, he noted.
Dowd said he believes another factor that may influence the market is the trend for all market sectors to be affected by the weakest sector.
``It's the story that the chain is as strong as its weakest link. Any more, if one segment of the market goes long, it doesn't make much of a difference that there is tightness in the other segments. They all tend to go the same way,'' Dowd said.
Jones said his company made the first move to rescind the price increase in an effort to build market trust that prices for PP reflect true costs.
``We are working to build a level of trust in PP pricing that we feel has not existed. We feel it is better to conduct a more open pricing policy,'' Jones said.