AKRON, OHIO — Reeling from tight margins and oversupply, North American polystyrene makers have taken a step to steady themselves by successfully pushing a 4 cent-per-pound price increase through to most buyers.
The increase is reflected in this week's Plastics News resin pricing chart.
``People have realized that no one's making any money in this market,'' said Bob Koaches, North American PS sales director for Dow Chemical Co. of Midland, Mich. Dow ranks as North America's second-largest PS producer.
With the increase, PS prices have moved close to the levels they were at in early 1997, but remain well under the peaks hit in mid-1996 before overcapacity caught up with market demand.
Many buyers contacted said they didn't expect the increase to hold for the rest of the year, since there was no solid supply-demand underpinning for the hike.
``The producers really just put their foot down,'' a New York-based buyer said. ``A few of them decided they weren't going to give it up and everybody else went along on their coattails.''
``Nobody's having a problem getting material,'' a South Carolina-based buyer said. ``The resin companies just wanted to get it through.''
Another New York-based buyer said he couldn't see the increase sticking because of low feedstock costs and plentiful supply.
``This could just be a flexing of muscle,'' the buyer said.
Some buyers speculated pre-buying in anticipation of the increase could lead to a reduction in demand in the next few months, spurring price drops that could cause the 4 cent jump to vanish by July or August.
But Dow's Koaches said pre-buying levels in January and February weren't above normal. Koaches added the market should be helped by seasonal spring increases in sales of high-impact PS.
Jean Meador, a consultant with Townsend Tarnell in Houston, agreed that the general sentiment among buyers was that the increase wouldn't stick for long, but she added predictions of a strong summer for the food packaging market could shore up demand and strengthen market pricing.
If the increase gradually erodes, it would be following 1998's pattern, where a 3 cent increase earlier in the year was offset by 4 cents in price erosion by the end of the year.