A price increase for polyethylene got a boost from several companies in mid-December, as more producers announced 5-cent-per-pound price increases. However, the companies adding their voices to the increase said their price hikes would go into effect Jan. 15 - two weeks later than those firms that announced first.
Beyond the PE increases, one analyst said he sees signs that increases for other commodity thermoplastics may be in the offing in the first half of 1996.
Dow Chemical Co., Lyondell Petrochemical Co. and Rexene Corp. said in early December they intended to increase PE prices by 5 cents per pound, effective Jan. 1.
Quantum Chemical Co., Exxon Chemical Co., and Union Carbide Corp., announced later in the month they intended similar price increases, but effective on Jan. 15.
The upshot of the subsequent announcements is to delay any price increase until the later date. One industry executive said staggered dates had been interpreted as a lack of support for price increases.
Now, he said, resin producers are wary because of a seven-month inquiry into price fixing launched by the U.S. Justice Department in January 1995, and purposefully staggered their price increase dates to avoid appearances of moving in lock step.
While the later dates may delay the increase, the subsequent announcements appear to demonstrate there is growing strength for a price increase.
Executives of resin-producing companies, industry analysts and buyers for PE processors said they believe price hikes will be effective in the first quarter of 1996.
They gave several reasons:
First, they believe the 1995 inventory correction is over.
Inventories were high during 1995, and prices fell as processors slowed their resin orders to trim them.
Now, according to buyers at four processing companies, orders are growing for January and February, and their companies' inventory levels are low. Those buyers said their companies will be returning to the resin markets with larger orders for resins early in January.
Secondly, spot market quantities of PE began to dry up in late November.
Resin company executives cite that as another sign that resin buyers are increasing orders, and that they are expecting further growth in demand.
Thirdly, everyone interviewed said they expect market conditions to improve in 1996 because it is a presidential election year.
With the presidential campaign and imminent election, the economy is expected to grow, boosting demand for resins through the first, second and third quarters of the year.
Industry analyst Paul Raman, vice president for research for S.G. Warburg & Co. Inc. of New York, believes conditions are ripe for price increases for PE, polypropylene, polystyrene and PVC in the first half of this year.