Polyethylene prices stopped to catch their breath after their headlong sprint through 1999, dropping 2 cents per pound since November. The PE downturn, which affected all grades of high, low and linear low density PE, comes after prices soared an average of 16-18 cents per pound in the first 10 months of 1999. Double-digit demand and scattered plant outages contributed to that wave.
The price dip was linked to a seasonal slowdown and some inventory reduction by processors, but shouldn't be part of a larger trend, according to Rick Salvador, PE business director for Nova Chemicals Corp. of Calgary, Alberta.
"There's not too much room for prices to go down, with high crude-oil prices and high ethylene prices," Salvador said.
Tim Taylor, PE business director for Phillips Petrolem Co. of Bartlesville, Okla., agreed that there was "some pause" in December, but that global fundamentals still indicate PE markets will be strong in 2000.
Nova and other PE makers saw some inventory shedding among processors, contrary to the inventory building some industry observers thought would happen because of Y2K-related supply concerns.
"I don't think Y2K was much of a factor," one PE executive said. "Processors adjusted their inventories downward as they became less concerned about it."
As a result, processor inventories heading into 2000 aren't as flush as expected, prompting PE makers to attempt to raise prices by 4 cents per pound Jan. 1.
Several producers — including Nova, Dow Chemical Co. of Midland., Mich., and Chevron Chemical Co. LLC of Houston — had rescinded 5 cent-per-pound attempts from October, while others, such as ExxonMobil Chemical Co. and Solvay Polymers, both of Houston, merely postponed and decreased those increases to match the Jan. 1 efforts.
One major, Illinois-based PE processor said the 2 cent drops are "a natural downturn from the highs" of 1999. He also said he expects further downturns at least into February, and doubts producers' claims that they weren't able to secure much profit-margin improvement last year.
"Producers gained more in price than ethylene went up," the processor said. "They say they didn't gain any margin until the second half, but I think they showed improvement all along."
The pipe and conduit market was one area that brought unexpected growth to HDPE in 1999, with sales and captive use up 30.4 percent through October, according to the American Plastics Council of Arlington, Va.
That surge accounted for about 28 percent of total HDPE growth in the first nine months of the year.
Phillips' Taylor said some of the pipe and conduit growth can be chalked up to firms using 8-inch HDPE pipe to house fiber-optic cables used for Internet hookups. HDPE is the preferred material for that application in North America, although Asian countries use PVC, Taylor said.
"Internet trunk lines are being laid across the country," he said. "It's a really good market that shows no signs of slowing down."
Major HDPE/LLDPE capacity expansions planned by Nova and Union Carbide Corp. of Danbury, Conn., at plants in Canada aren't expected to affect PE markets until late 2000 or early 2001.
The only other capacity issue affecting the market in the near future will be Houston-based Equistar Chemicals LP's closing of 300 million pounds of HDPE capacity and 60 million pounds of LDPE capacity in La Porte, Texas.
Those closings, however, will be offset by recent expansions and streamlinings, which have added a total of 600 million pounds of HDPE capacity at Equistar plants in Matagorda and Victoria, Texas.