AKRON, OHIO — Prices for polyethylene, polypropylene and PVC continued to drop in April, as attempted price hikes failed to lessen the impact of plunging feedstock costs and decreased exports to Asia.
High, low and linear low density PE, PP and PVC prices each dropped an average of 1 cent per pound in April, according to buyers and producers contacted recently. These changes are reflected this week on Plastics News' resin pricing chart.
PE makers had sought increases of 3 cents or 5 cents between mid-March and April 1, while PP makers were after a 3 cent jump April 1 and PVC producers were seeking 3 cents on the same date. None of those moves has been put into effect, although many producers have left them on the table instead of rescinding them.
The PE drop was unanimous in LLDPE but was spotty in HDPE and LDPE film grades, according to two major producers.
``In polyethylene, the movement of the price seems to be psychological,'' one PE supplier executive said. ``Our sales have remained the same and volume is within a few percentage points of where it was last year.''
Another PE executive said that when prices are low as a result of overcapacity, ``people don't come and ask for an extra rail car [of PE] anymore.''
``If you're getting 10 cars and you want one more, that's not a lot by itself, but when a whole bunch of people do it, it starts to add up in terms of pricing,'' the executive said.
Producers also expressed concern about further price drops in the summer months, which typically run slow on sales and production.
``It's getting to the point where it's pretty bloody from the polymers side, as far as the profitability of the business,'' one executive said. ``The erosion has to stop.''
In PP, lack of solidarity among producers undercut the increase attempt, while slippage in propylene prices moved prices down.
Market leader Montell Polyolefins was supported in the increase by Exxon Corp., Union Carbide Corp. and Epsilon Products, but No. 2 producer Amoco Polymers held out, along with Fina Oil & Gas Co. and Solvay Polymers.
``[The PP increase] was only supported by a handful of North American producers and there was no justification for it from the feedstock side,'' said one Chicago-based PP buyer. ``We thought it was dead from the beginning.''
PP resin plants now are on pace to run at only 84 percent of capacity in 1998, a 3 percent drop from 1997.
The PVC cut may have been the unkindest of all, since producers and pipe processors, which hold top market share, said demand and volume have been very good, but a glut of resin so far has prevented the spring construction boom from lifting prices.
``It's got nothing to do with demand,'' a PVC executive said of the April decrease. ``Pipe is healthy and we're selling well into construction end uses.''
Several buyers said they were surprised by the April drop, since most indicators led them to believe the 1 cent drop seen in March would be the last for some time.
``Producers may start to shut down capacity,'' a New Jersey-based buyer said. ``There's got to be some rationalization.''
An Alabama-based buyer said the availability of PVC was evident in shortened delivery times from his suppliers. A resin order the buyer called in on a Wednesday was shipped just five days later, while an order for resin used to make PVC foam was shipped within a week, instead of the standard two- to three-week delivery time.
``We've got no problems calling and getting rail cars of material,'' the buyer said. ``If there's any tightness in the market, it'll have to be caused by the producers.''
A number of factors — including announced increases, drops in ethylene and ``the psychology of Asia'' — are combining to muddle the PVC market, according to Pat Duke, an analyst with Houston's DeWitt & Co. consulting firm.
``The export market is still doing pretty well in terms of volume, and domestic inventories are low, which would put processors in a position where they need to buy,'' Duke said. ``But for whatever reason, producers can't seem to get their prices up.''
Buyers throughout the United States and Canada said they have seen a definite upswing in the number of resin producers and brokers contacting them in attempts to move material in recent months.
``I've got brokers calling me now who haven't called all year,'' according to a Chicago-based buyer. ``To me, that's a sign things are soft.''