AKRON, OHIO—Some early price softening is beginning to show in the PVC resin market, according to resin makers and buyers contacted last week.
To reflect this trend, Plastics News is showing a 2 cent price reduction in all grades of PVC on this week's resin pricing chart.
The chart also indicates a correction in the price for virgin polyethylene resins, to reflect current market conditions more accurately.
PVC suppliers blamed a slower-than-expected construction season and the side effects of an earlier vinyl chloride monomer shortage.
Housing starts were down 3 percent in the first six months of 1997 compared to the previous year, according to a recent report from the U.S. Census Bureau. That percentage represents almost 24,000 fewer housing units.
The VCM shortage helped boost PVC prices earlier this year, but now has led to an overcapacity since VCM supplies have stabilized, said a source at a Houston-based manufacturer.
The price softening has come earlier in the year than resin makers are accustomed to, said Charlie Matson, PVC sales director for Condea Vista Chemical Co. of Houston.
``This should be our season for doing well, since it's the PVC construction season,'' Matson said in an Aug. 4 telephone interview from his Houston office. ``But people with extra pounds are cutting the price to move those extra pounds. That ends up being a self-defeating plan.''
Tom Stevning, PVC business director for Formosa Plastics Corp. USA of Livingston, N.J., said the reduction is not a long-term problem, adding his company has lowered its production rates to keep inventory growth in line.
``The overall PVC market isn't bad,'' Stevning said by telephone from his Indianapolis office. ``But the siding and pipe guys are having a hard time.''
A PVC buyer in Battle Creek, Mich., said excess PVC capacity has led some manufacturers to make deals simply to move resin.
``I have to believe, because there's so much capacity, that there aren't enough new businesses out there,'' said the buyer, who purchases 12 million to 14 million pounds of PVC annually.
And although a New Jersey-based buyer predicted an additional 2 cents would come out of the PVC market by the end of September, Lou Maresca of the Geon Co. said the Avon Lake, Ohio, firm already has seen orders pick up for August. Maresca is Geon's vice president and general manager of resins.
``There was a lot of early buying at the beginning of the year because a lot of customers anticipated sharp price increases,'' Maresca said. ``The reduction is just a temporary inventory adjustment in the industry.''
The softening has made it difficult for manufacturers to push through price increases that have been hanging over the industry for several months.
Suppliers have announced four separate rounds of price hikes this year — one at 3 cents and three at 2 cents. Buyers said they have seen between 3 and 5 cents overall. PVC makers have delayed and split the last two 2 cent increases into various configurations, which still are pending.
Prices for all grades of PE have been reduced 2 cents on the Plastics News chart. Buyers indicated the prices Plastics News had been showing since spring were not in line with invoice prices.
Additionally, prices for all grades of linear low density PE have dropped 1 cent over the summer because of a lower-than-average purchasing rate in July. This decrease was confirmed by a major LLDPE manufacturer and several buyers.
An executive at the manufacturer, who wished to remain unidentified, said early orders for August have indicated the 1 cent LLDPE reduction may be regained within a month.
A pending price increase for polyphenylene oxide and polyphenylene ether (PPO/PPE) alsohas been removed from Plastics News' chart. An executive at PPO/PPE leader GE Plastics said about half of the firm's 7 cent increase on flame-retardant products and 4 cent increase on nonflame-retardant products went through after being announced in April. That increase was not confirmed by all buyers contacted.
Plastics News' price range for PPO/PPE is unchanged.