Major PVC makers are attempting to continue their late-1998 momentum by raising prices in March, while a similar movement is building among polypropylene producers.
PVC makers Occidental Chemical Corp. of Dallas; Geon Co. of Avon Lake, Ohio; Borden Chemicals and Plastics LP of Columbus, Ohio; Condea Vista Corp. of Houston; Georgia Gulf Corp. of Atlanta; and Formosa Plastics Corp. USA of Livingston, N.J., each announced hikes of 3 cents per pound.
Producers cited continued strong demand as well as decreased activity in the spot market as reasons for tightening in both PVC supply and pricing, which lost an average of 8 cents per pound in 1998. A 1 cent price increase was successfully passed through to buyers in late 1998 and producers are seeing some success with a 2 cent move that was to be effective Jan. 1.
``The time is right,'' one PVC executive said. ``Both the pipe and siding markets have been very strong in the early going this year.''
The PVC market, more than half of which goes into construction uses, was bolstered by a Feb. 17 report from the U.S. Census Bureau that showed housing starts in January reached a seasonally adjusted annual rate of 1.8 million — their highest mark in more than 12 years. These early results run contrary to many predictions of a sluggish housing market in 1999.
PVC supply also will be affected by Borden's decision to transfer more than 200 million pounds of suspension-grade PVC production at its Illiopolis, Ill., plant. Production from that plant will be transferred to Borden sites in Addis, La., and Geismar, La. A Borden spokesman said the Geismar and Addis plants are more efficient than the Illiopolis plant, which opened in 1975.
Borden will continue to produce about 250 million pounds of specialty PVC resins — including dispersion and blending grades and copolymers — in Illiopolis. A company spokesman said Borden plans to use the vacated capacity to expand specialty resin production later this year.
The Borden move is expected to tighten short-term North American PVC supply by removing more than 200 million pounds of material from the market.
The PP increase, set for March 15, is being led by second-ranked Fina Oil and Chemical Co. of Dallas, which plans to raise prices by 1.5 cents per pound. Other producers — including Huntsman Corp. of Salt Lake City, Solvay Polymers Inc. of Houston, Union Carbide Corp. of Danbury, Conn., and Epsilon Products Co. of Marcus Hook, Pa. — soon followed with 3 cent increases set for the same date.
The verdict is still out on the increase, however, since market leader Montell Polyolefins of Wilmington, Del. — along with top 5 producers Amoco Polymers Inc. of Alpharetta, Ga., and Exxon Chemical Co. of Houston — have yet to take similar action. Combined, Montell, Amoco and Exxon control almost 40 percent of North American PP capacity.
With more than 2 billion pounds of capacity set to come on line in North America in 1999, the PP market's overcapacity woes look to continue for the near future. Prices dropped by another cent per pound in January as overproduction kept material plentiful.
``The [PP] resin companies know the erosion's got to stop, but there's always one or two of them out there who get greedy and want the poundage, so they don't hold their prices,'' a Pennsylvania-based PP buyer said. ``I honestly hope it doesn't go down any lower. Somebody has to make some money.''
Short-term PP supply could be affected by Fina's decision to move forward with an extended maintenance turnaround on one of its world-scale production units in La Porte, Texas. Fina officials could not be reached for comment, but industry sources said this turnaround will lead to the temporary closing of a 620-million-pound line Fina opened at the site in late 1996.
PP prices dropped an average of 6 cents per pound in 1998, even though North American demand was up more than 4 percent.