PVC resin prices slipped a total of 1 cent in May and June as strong demand in the pipe market didn't quite offset overcapacity.
The latest downturn comes at a time of year generally considered strong for PVC demand, as construction work boosts demand for PVC pipe and siding.
``Our demand is up and extremely strong,'' an official at a Texas-based PVC pipe maker said. ``But a lot of people at the [PVC] raw material companies are telling me PVC prices aren't going to get any better.''
Healthy pipe demand should improve pipe producers' profitability, which in turn would help the PVC market, said an official at Occidental Chemical Co. of Dallas. Pipe and other construction applications account for about 60 percent of total North American vinyl consumption.
OxyChem is merging its PVC operations with those of Geon Co. of Avon Lake, Ohio. The new firm would be North America's largest PVC maker, with 4.2 billion pounds of annual capacity.
``[PVC makers] are still under a lot of pressure, but the rate at which prices are decreasing should slow down,'' the OxyChem official said. ``If it keeps going, some companies will be below their full cash cost and you can't operate like that.''
Weakened resin prices continue to register in financial returns reported by PVC makers. Geon, OxyChem, Georgia Gulf Corp. of Atlanta and Borden Chemicals & Plastics of Columbus, Ohio, each cited diminished resin prices as a reason for lower earnings in recent quarterly reports.
The OxyChem official added that the impact of decreased exports to depressed Asian markets has been offset by increased export efforts in Latin America, the Middle East and Africa. First-quarter trade more than doubled over the previous year in each of those regions.
Two reports that the official referred to illustrate the difficulty the industry is having in projecting the impact of Asia's economic crisis on the PVC market.
The first report, from an industry consultant, predicted a 14 percent drop in PVC exports to Asia in 1998, while a recent report from the Society of the Plastics Industry Inc. in Washington states that Asian exports increased 22 percent through the first six months of the year.
Dick Roman, an industry consultant in Avon Lake, Ohio, said the impact of the PVC export situation is difficult to decipher, since export volumes are actually up though prices of exported material have slipped as low as 20 cents per pound in some cases. By comparison, pipe-grade PVC prices remain in the high 20s.
Department of Commerce reports show significant export increases in many Latin American and Middle Eastern countries, Roman said.
``It's a combination of a lot of capacity coming on last year and early this year and more competitors selling exported resin at lower prices,'' Roman said. ``I think a lot of countries see PVC as a bargain right now because of the rock-bottom prices.''
``Poundwise it looks good, but dollarwise, it's not as good,'' he said. ``The positive thing for resin makers is that [U.S.] inventories are going down, so there's a possibility they can keep prices stable.''