Flying in the face of slumping prices, Exxon Corp. of Houston has announced plans to build a 605 million-pound-per-year polypropylene plant in Baton Rouge, La.
``We believe the product's versatility, for applications ranging from automotive parts to food packaging and fibers, will continue to propel polypropylene's global demand, and we expect this trend to continue through the next decade,'' Mark Dickerson, Exxon North American PP general manager, said in a news release.
The expansion, when combined with a 530 million-pound PP expansion that began operating last July in Baytown, Texas, will give Exxon total PP capacity of almost 2.2 billion pounds.
The project will be Exxon's first for PP in Baton Rouge, where it now makes high density polyethylene. It will produce mostly homopolymer-grade PP, but also some random copolymer material and metallocene-based propylene polymers. The project will be the largest single PP production line in the world, said Mal Kaus, Exxon's North American PP marketing manager. Capacity will be aimed at the textile, film and automotive markets, he added.
Exxon's show of confidence comes despite a 3 cent slip in PP prices so far this year, including a 1 cent May drop that is reflected on this week's Plastics News resin pricing chart.
``Between now and our start-up, it's going to be a tough period for the polypropylene industry,'' Kaus said. ``But if you don't start now, you won't be able to take advantage of the cycle when it turns up again.''
Meanwhile, Union Carbide Corp. has announced a 3 cent-per-pound PP price increase attempt for July, but no other major PP maker has followed Carbide's lead.
``Margins remain unacceptably low and there's a possibility of an additional squeeze on propylene prices,'' said Carbide PP business director Matt Lonkitis. ``But demand is up over last year, especially in the molding extrusion market.''
Market leader Montell Polyolefins of Wilmington, Del., had not made a decision on the increase attempt, while officials at second-ranked Amoco Polymers of Alpharetta, Ga., and Epsilon Products of Marcus Hook, Pa., said their firms had no plans to support the July 1 attempt. Kaus declined comment on Exxon's position.
Low propylene monomer prices, combined with an oversupply of resin, have been the primary cause for the price plunge. Sources at some major PP makers disputed the drop, claiming it was not consistent across all grades of material.
Processors contacted, including major buyers in Illinois, Florida and Ohio, were more convinced of the move, based on inventory situations at their suppliers.
``We haven't had any problems getting polypropylene,'' a major Chicago-based buyer said. ``We're getting calls from producers we haven't done business with before. They may be trading shares, but they're still doing something.''
Some processors speculate that major PP makers may idle production in order to tighten supply. An executive at a leading PP maker said he has heard such talk, but does not know of any firm ready to take that step.
``There's some older capacity out there, particularly at Fina and Huntsman, but I don't know how much they would gain by [cutting back on production],'' he said.
North American PP sales and captive use through March were almost 6 percent ahead of the 1997 pace, while production has increased at a 5.5 percent clip, according to the Society of the Plastics Industry Inc. in Washington.