Polyethylene and polypropylene prices continued to slide in July, each dropping 1 cent per pound as buyers and analysts alike wondered how much further the market would drop.
``I didn't even ask for a decrease this month,'' a New York-based PE buyer said of the July drop. ``It was just there on my contract.''
Cries of ``overcapacity'' and ``decreased export demand'' echoed through July, but some buyers conceded this year's pricing slump might be losing steam.
``I'm skeptical of how long we'll see a penny-a-month reduction,'' a Pennsylvania-based PP buyer said. ``[PP producers] are really screaming.''
Major PP makers are trying to capitalize on this mindset by attempting to raise prices by 3 cents per pound in September. Some have announced a Sept. 1 effective date, others are gunning for Sept. 15.
Officials at market leader Montell Polyolefins of Wilmington, Del., confirmed the increase attempt, as did officials at Aristech Chemical Corp. of Pittsburgh. Several industry sources said Exxon Corp. of Houston had taken the same step, but Exxon officials could not be reached for comment.
``Producers are at the bottom, based on margin,'' an Aristech official said. ``Every segment is busy all across the board — fibers, film, molding — but the industry's losses have been considerable.''
Officials at Phillips Sumika Polypropylene Co. of Houston, Union Carbide Corp. of Danbury, Conn., and Amoco Polymers of Alpharetta, Ga., said late last week that their companies had not announced similar increase attempts. PP makers Epsilon Products, Huntsman Corp., Fina Oil and Chemical Co. and Formosa Plastics Corp. USA could not be reached for comment.
One PP executive said a price increase was needed, but he admitted high customer inventory levels and the pending addition of 400 million pounds of capacity at Fina's La Porte, Texas, PP plant would have to be reckoned with before an increase could go through.
Meanwhile, major PE makers are still working to pass on a 5 cent-per-pound increase that was set to go into effect Aug. 1. Some buyers were skeptical of the increase's chances, citing widespread PE availability, while others said late-year stagnation in the market might allow some of the increase to take hold.
Industry consultant William Kuhlke of Kuhlke & Associates in Houston said PE overcapacity has been most serious in linear low density PE, which he said is selling at ``ridiculous prices.''
``Conventional high density [PE] is still showing good profitability, but linear low has fallen to the point where producers aren't making any money,'' Kuhlke said in a recent telephone interview. ``People with overcapacity are just trying to cover fixed costs and sell material.''
PE buyers also may be looking ahead to a sizable amount of new capacity scheduled to come on line later this year, according to one PE executive.
Three plant expansions — Mobil Chemical Co. in Beaumont, Texas; Exxon Corp. in Mont Belvieu, Texas; and Westlake Corp. in Lake Charles, La. — will add a total of 1.25 billion pounds of additional HDPE/LLDPE swing capacity by the end of the year. Fina is adding 400 million pounds of HDPE capacity in Bayport, Texas.
``I think a lot of what's going on is in anticipation of what's scheduled to come on,'' the executive said. ``Today, the market's not dramatically out of balance.''
To producers' relief, there are some signs the PE/PP slide is slowing down, according to Pat Duke, a consultant with DeWitt & Co. in Houston.
``Demand is holding up, but the problem is everybody's getting down to the bottom on pricing,'' Duke said. ``Feedstocks and polymers can't go down anymore unless there's a major cost reduction in crude oil and natural gas.''
North American sales and captive-use figures provided by the Society of the Plastics Industry Inc. in Washington were promising for PP and HDPE but not very exciting for LDPE and LLDPE.
Through May, PP sales and captive use had climbed 5.4 percent and HDPE had risen almost 4 percent over 1997, while LDPE totals were down more than 5 percent and LLDPE had dipped 0.5 percent.
Productionwise, PP was up almost 6 percent, HDPE was up more than 5 percent and LLDPE was up almost 4 percent. LDPE was the only laggard of the group, with production slipping almost 1 percent.