Prices for high, low and linear low density polyethylene slipped another cent per pound last month, marking the fourth consecutive month the PE industry has absorbed a penny-per-pound drop.
Industry officials, analysts and processors contacted recently all cited continued softness in ethylene feedstock prices and the inability of North American PE to make its way into Asian markets in the wake of that region's economic distress.
``It looks like the Asian crisis has rolled over and lowered prices to the point where I'm not sure some of these companies are covering cost,'' a major PE buyer based in Virginia said. ``Unless [PE makers] make a decision to cut back production and reduce reactor time, I don't know how [the decline] is going to stop.''
However, several PE executives said cutting back on production is unlikely.
``Traditionally, you see [cutbacks] happen if you're at the bottom of the trough, but we're not at that point yet,'' one executive at an LDPE/LLDPE maker said. ``We're not taking any drastic measures.''
Another executive at an HDPE/LLDPE maker said demand has been ``a little weak'' in LLDPE, but his company still is selling what it is producing each month.
``If our inventories climb, we might look at [cutting back production],'' the executive said. ``But [cutbacks] usually don't happen until the lowest-cost producer is down to his cost.
``Our actual sales are up slightly,'' he added. ``But inventory has moved away from the processors and back to the producers.''
With the exception of HDPE, with growth of more than 4 percent, North American PE sales and captive use have lagged behind 1997 rates so far in 1998, according to the Society of the Plastics Industry Inc. in Washington.
SPI sales and captive use totals through March show LLDPE up less than 1 percent and LDPE down more than 6 percent.
North American PE production has remained fairly healthy, with HDPE up more than 5 percent, LLDPE up more than 4 percent and LDPE up 0.5 percent, according to SPI.
In spite of producers' optimism, some industry watchers, including Rob Harvan, an analyst with Houston's Bonner & Moore consulting firm, believe PE makers may have no other choice but to cut back production.
``Prices can still move down,'' Harvan said in a recent telephone interview.
``At some point out there [PE makers] will have to shut down some of their lines to artificially support the market.''
Prices have dropped despite major traffic problems on Union Pacific Railroad Co. rail lines, which some suppliers said made it very hard to ship resin.
``If there was a possibility of a supply pinch, it would have been when the UP wasn't moving cars,'' Harvan said. ``But despite lawsuits against the UP [by resin producers] we still saw prices erode.''