AKRON, OHIO — Major North American polyethylene makers are attempting to combat a dismal first half of 1998 by raising prices 5 cents per pound effective August 1.
``June was an outstanding month for demand,'' said Len Azzaro, PE commercial director for top-three PE maker Dow Chemical Co. of Midland, Mich. ``We're not seeing a seasonal slowdown.''
But pricing remains a highly visible issue. Prices for high, low and linear low density PE each dropped an average of 1 cent per pound in June, according to buyers, suppliers and consultants contacted recently. The downturn, shown on this week's Plastics News resin pricing chart, marks the sixth consecutive month the market has seen a 1 cent dip.
Others joining Dow in the attempt, according to industry sources, are Exxon Corp. of Houston; Nova Chemicals Inc. of Calgary, Alberta; Mobil Chemical Co. of Edison, N.J.; Union Carbide Corp. of Danbury, Conn.; Chevron Corp. of Houston; and Westlake Polymers of Houston.
All increases are set for Aug. 1, with the exception of Nova's move, which will go into effect Aug. 15.
``Inventory levels on everyone's part are pretty low, so there should be a pickup in demand in the September time frame,'' said Nova PE business manager Rick Salvador. ``The market keeps growing—it doesn't seem to be prohibited by what's going on in pricing.''
Through April, only HDPE had shown significant sales growth in North America, according to the Society of the Plastic Industry Inc. in Washington. HDPE sales and captive use were up more than 4 percent, while LLDPE was up less than 1 percent and LDPE was down more than 6 percent.
Overcapacity and depressed Asian markets still are being cited as reasons for the tailspin. Westlake expects to bring on a 440 million-pound HDPE/LLDPE line later this summer, while Exxon is on track to open a similar 540 million-pound line and Fina Oil & Chemical Co. of Dallas will add 440 million pounds of HDPE capacity later this year.
``LLDPE has been in overcapacity for a while and now there's new capacity coming on in HDPE,'' said Donna Todd, a consultant with Phillip Townsend Associates Inc. of Houston. ``[PE makers] planned all of this in 1994 and 1995 when prices were up and now [new capacity] is all coming on at once.''
Todd added that North American PE suppliers are being hurt by large amounts of Asian resin that are popping up at drastically reduced prices in Latin America.
``Central and South America have been traditional export markets [for North American companies], but now the Asians are going out to capture business and Latin America is absolutely drowning in Asian resin,'' she said.
The net result of the attempted price move in a downward market is a field of buyers who are skeptical at best.
``I had a [PE] sales rep tell me his company has an increase letter out for August 1 and right after that he said, `Oh, by the way, your price is down 1 cent this month,''' a major Virginia-based PE buyer said.