The PVC market didn't take time off for the holidays, bolting prices forward another 2 cents per pound since December. Meanwhile, polycarbonate makers spent the season celebrating their first significant price increases since 1996.
PVC prices continue to rumble ahead like the bulldozers that clear the way for PVC pipe to be laid at busy construction sites throughout North America. With the Dec. 1 increase taking hold, PVC prices have climbed 16 cents since early 1999 — an increase of roughly 67 percent on pipe-grade resin.
Material supplies continue to be tight, even with the Commerce Department reporting that new home sales for November dropped beneath analysts' estimates by almost 60,000 annualized units. October's new home totals had exceeded those estimates by more than 100,000 units.
Pipe and other construction-related uses accounted for about 60 percent of PVC sales through October, according to the American Plastics Council in Arlington, Va.
"Construction looks like it slowed down, but PVC makers are still working from behind with almost no inventory," said David DiPiero, PVC business director for Formosa Plastics Corp. USA of Livingston, N.J. "Even if home sales slowed down, we probably wouldn't see any effect for six months because the market's so tight."
But many processors contacted wondered how much further PVC makers should push the price advantage they're enjoying, even though no new capacity is set for 2000.
Most major PVC makers, including market leader Oxy Vinyls LP of Dallas, have additional 2 cent jumps on the table for Jan. 1, but No. 2 player Shintech Inc. of Houston has held out, casting doubt on the increase's chance for success.
Shintech officials could not be reached for comment.
"If you're a logical business person, price increases have to be something your customer can absorb or pass on," an Ohio-based PVC processor said. "There's a limit to it and PVC makers have to be smart about how they handle the situation."
A Texas-based processor said tight PVC supplies have caused his firm to keep product inventories about 30 percent lower than normal.
"I'm actually hoping we have a slow January so we can rebuild some inventory," he said.
Several processors added that further PVC price increases could move prices closer to competing, nonplastic materials such as ductile iron. Such concerns might lead PVC makers to delay the Jan. 1 increase until March or April, the Texas processor said.
Formosa's DiPiero added that tight conditions, which have led most PVC makers to limit customers to contract purchase volumes, may prompt processors to buy — even if construction lags — in an effort to build resin supplies and escape future price increases.
Strong overall PVC growth has backed up producer's price-raising efforts. Through October, U.S. PVC demand was up almost 7 percent, according to APC.
In polycarbonate, producers have pushed through, on average, 8 cents of a 10 cent-per-pound increase that was announced in late October and early November.
Most small to mid-sized processors contacted said they had seen the increase, while several large processors said they were still negotiating the increases with their suppliers.
Several processors said they've seen less lower-priced, imported PC available in North America, which may have tightened supplies somewhat and allowed the increase to take hold.
PC makers GE Plastics of Pittsfield, Mass., and Bayer Corp. of Pittsburgh have announced additional increases of 11 cents per pound for Jan. 17, citing increasing costs for raw materials, transportation and energy.
Officials at Dow Chemical Co. of Midland, Mich. — North America's other large PC supplier — had not announced a second increase as of Jan. 7.
GE officials had pegged 1999's PC growth rate at around 8 percent, led by strong gains in compact discs, CD-ROMs and digital versatile discs. The firm also increased its PC pounds-per-vehicle levels in the automotive market last year.
Except for a slight uptick in late 1998, PC prices hadn't risen considerably since a 15-cent jump in early 1996. PC prices had dropped almost 23 percent since then because of industry overcapacity and fierce domestic and international competition.
General-purpose and injection molding grades had dropped to $1.38-$1.47 per pound. The late-year increase lifts general-purpose injection prices to $1.46-$1.55 per pound.