Polypropylene prices slipped another penny per pound in June. Meanwhile, polystyrene prices dropped 2 cents during May and June, erasing a 3 cent increase PS makers achieved earlier this year.
``[PP prices] are getting down to pretty dirt cheap,'' a major Pennsylvania-based PP buyer said. ``But [PP makers] are still out there fighting, so we'll just go from there.''
``Polypropylene operating rates have been in the mid- to high 80s for almost 12 months, and any time they're below 92 percent it's seen as a sign of weakness in the industry,'' said Robert Bauman, vice president of Chem Systems Inc., a consulting firm in Tarrytown, N.Y.
Bauman said the picture is somewhat clouded by the different levels of integration among PP makers.
``[Suppliers] say they're pushing cash cost and [prices] can't get any lower, but not everybody's producing at the same cost,'' he said. ``A high-cost producer might be at the full limit and end up losing money, but some might have a couple cents left in their margin because of good feedstock positions.''
PP officials continue to point to the usual suspects: overcapacity and decreased demand from Asian markets.
``The market is still strong, but capacity expansions have outpaced demand,'' said an official at a Texas PP maker. ``If a lot of people are losing money they might say `enough is enough' and throttle back capacity.''
``The export market is weak and there are more pounds seeking homes in the United States,'' said Michael Pembroke, PP sales and marketing director for Epsilon Products of Marcus Hook, Pa.
Producers and buyers also are keeping an eye on the flood of PP capacity scheduled to become available in the next 18 months, starting with a 550 million-pound-per-year line coming from Fina Oil and Chemical Co. of Dallas later this year. Almost 3.5 billion pounds of new PP capacity is to be added in North America by 2000.
Pembroke added that the strike at two General Motors plants in Michigan is hurting PP demand.
``[The strike] is having enough impact that buyers are backing off orders,'' he said. ``People who are making parts like door panels don't have a lot of buildup right now. Some sales that we've anticipated haven't been there.''
The market for PP fibers is soaring as automotive sales are slowing down, according to Pembroke, who said fiber makers ``just can't get enough'' PP.
He also disputed using a 92 percent capacity utilization rate as a divider between strength and weakness in the market, saying PP makers still could be relatively healthy if they were near 92 percent.
``[PP makers] aren't where we want to be, but we're not at wholesale crash-and-burn either,'' he said.
Through April, North American PP sales were up almost 6 percent over 1997, while production was up almost 6 percent as well, according to the Society of the Plastics Industry Inc. in Washington. Bauman anticipates 7 percent annual sales growth through 2000, but capacity will climb 12 percent annually in that same period.
In PS, the brief respite producers had gained from the earlier 3 cent boost is over.
PS makers ``were lucky to get the 3 cents,'' a major Massachusetts-based PS buyer said. ``Now there's a lot of anxiety [among buyers] about renewing contracts because 1997 rebates are being topped in 1998.''
``There's been a lot of competition and some undercutting,'' a Houston-based industry analyst said. ``Producers are also concerned about increasing market share with the BASF opening.''
BASF Corp. of Mount Olive, N.J., is adding 240 million pounds of PS capacity in Joliet, Ill., in the fourth quarter.
That expansion, combined with last month's withdrawal of a July 1 price increase attempt, will make it difficult for producers to mount another increase move this year, according to several buyers. Five of six major PS suppliers had supported the increase, but suppliers withdrew when No. 6 producer Chevron Corp. of Houston declined to match its competitors' actions.
Through April, North American PS sales were up less than 1 percent, while production dropped almost 1.5 percent, SPI said.