AKRON, OHIO—Oversupply, lower feedstock costs and increased competition among resin producers drove prices for all grades of polyethylene and suspension grade PVC down 1 cent per pound in March, according to buyers and producers contacted recently.
The PE drop marks the third consecutive month that buyers saw a 1 cent downturn. In PVC, most buyers have seen a 2 cent drop since the first of the year.
A Massachusetts-based HDPE buyer said prices continue to drift downward even though demand at his business has been good. A North Carolina PE buyer cited continuing downturns in ethylene pricing as motivation for the PE drop, but added prices may stabilize in April.
``The producers might not be able to take any more losses,'' he said.
An Ohio-based HDPE buyer pointed out that pricing and supply situations have been complicated this year by much-publicized rail congestion on Union Pacific lines. For the Ohio buyer, the slowdown has led to worst-case scenarios — such as the recent delivery of a rail car of HDPE 110 days after it was shipped — and, in his opinion, has caused buyers to increase their market awareness.
``It's one of those years where if you're surprised by anything, you're not doing your job,'' he said.
Although producers such as Dow Chemical Co., Nova Chemicals and Union Carbide Corp. are seeking 5 cent increases effective April 1, others such as Equistar Chemicals, Solvay Polymers and Phillips Petroleum Co. are at the 3 cent mark.
``You always listen to the end of the market,'' the Ohio buyer said. ``You're never going to get 5 cents if a 3 cent is out there.''
Several announced capacity expansions could affect the market later in the year. Exxon Corp. plans to add 490 million pounds of linear low density PE capacity in Mont Belvieu, Texas, while Equistar is projected to add 125 million pounds of HDPE capacity in Victoria, Texas. Fina Oil and Chemical Co. will boost HDPE capacity by 400 million pounds in Bay Port, Texas.
In PVC, buyers also thought the 1 cent drop they saw might be the last of the season.
A Texas PVC buyer echoed familiar factors that have surfaced in 1998 — strong domestic demand countered by weak export markets caused by the Asian economic crisis.
The PVC export market has bottomed out and ``should begin to click up again,'' according to a spokesman for Occidental Chemical Co. of Dallas, North America's fourth-largest PVC maker.
Healthy domestic demand, particularly in the pipe market, is making producers optimistic about the chances of a 3 cent price hike announced for April 1, the spokesman added.
A New Jersey buyer was less convinced. ``I don't see how it can happen,'' she said. ``Producers can't move anything overseas.''
Pipe producers have changed their buying habits, which is forcing PVC makers to adjust, according to one Wisconsin-based PVC buyer.
``Pipe companies aren't maintaining their old habit of loading up at a certain time because now they think the price will drop,'' the buyer said. ``Prices would always start to go up in January and February and by July they'd be done, but that's not happening anymore.''
The market downturn also increased competition. The Wisconsin buyer said two or three PVC makers used to call on his company each month, but that number is now up to five or six.
``That's not usually the situation here,'' he said. ``Producers are really fighting for the market.''