AKRON, OHIO — Healthy supply situations have dropped prices 1 cent for high and low density polyethylene in recent weeks, while decreased demand in the pipe market has driven PVC prices down 2 cents since mid-December, according to buyers contacted recently.
The changes are reflected in this week's Plastics News resin pricing chart.
The HDPE and LDPE drops follow a linear LDPE price drop reported in mid-January. A major Ohio-based HDPE buyer said demand for blow molding-grade HDPE has not increased in early 1998 and, that while demand for HDPE pipe resin has been strong, it has not been enough to offset overcapacity in the industry.
HDPE buyers pointed to the pending opening of Fina Oil & Chemical Co.'s 400 million-pound HDPE plant in Bayport, Texas, during the fourth quarter of 1998 as a capacity issue that will affect market pricing. But an industry executive countered that the new plant will not have as much impact as some are expecting.
``[Fina] obviously has to find a home for that new resin, but it's only 400 million pounds in a 13 or 14 billion-pound market,'' the executive said. ``You almost need that just to maintain the growth rate.''
A New York-based buyer for HDPE and LDPE added that downturns in ethylene monomer prices — three-quarters of a cent for December — contributed to the PE slippage.
One industry executive agreed, saying his firm set a record for HDPE blow molding resin orders in January, but still lost a cent on pricing as a result of passing through the ethylene decrease.
In PVC, the 2 cent drop is a combination of a 1 cent dip some buyers saw in December and another 1 cent downturn that a greater majority saw in January.
This continued softening is making it more and more difficult for resin makers as they work to implement 2 cent price hikes set to take effect in early February.
Buyers pointed to substantial decreases in Asian export sales resulting from that region's economic woes.
``From the domestic side, demand's as strong as it's always been,'' a Texas-based PVC buyer said. ``But the Asian market is hitting the bottom.''
The buyer added that he has seen Asian PVC prices dropping as low as 25 cents a pound, with an additional 2 cent reduction possible in the next month.
New York investment firm Salomon Smith Barney recognizes this trend in its Jan. 23 ``Energy & Chemicals in Pictures'' report on the Asia-Pacific region. The report states that the ``sharp slowdown in construction activities is very negative for PVC demand, as such inventories are currently high and prices are declining.''
A Missouri buyer said the PVC increase attempts may have been a tool to stop further price erosion.
``U.S. pipe demand has been firm, but not as much as PVC makers expected in January,'' the buyer said. ``They're more or less trying to put a floor on [pricing].''
Other issues playing a role included steady chlorine prices, slumping ethylene prices and the effect of 450 million pounds of new capacity brought on recently in Pasadena, Texas, by Occidental Chemical Co.
Nevertheless, PVC makers were sticking to their guns in hopes of improving their margins by way of the 2 cent jump.
``There's a lot of uncertainty in the marketplace because of the Asian currency situation, but we're still proceeding forward,'' said Barry Hendrix, PVC sales director for Geon Co., North America's second-largest PVC maker.
Condea Vista Co. of Houston is also optimistic about the increase. Charlie Matson, PVC sales manager, said that what some are perceiving as soft pipe demand actually may be a reduction in pre-buying habits.
``If you look at pipe demand, there's usually none in the U.S. in January anyway,''Matson said. ``But the traditional buying pattern has been that buyers buy ahead then because they think that will be the lowest price for the year.''
A pre-buying drop isn't necessarily bad news for PVC makers.
``The demand is still there even if buyers don't pre-buy,'' Matson said. ``It just means the market will be there in March and April.''