ABS makers, fresh from their first successful price hike in at least four years, have announced a new round of increases. Meanwhile, PVC makers are grappling with an increasingly tight market, which has led some producers to eliminate or reduce standard 30-day price protection, thereby altering the schedule on which price hikes are being enforced.
ABS producers and processors reported that prices for pipe-fitting grades rose 5 cents per pound last fall, while medium- and high-impact injection molding grades climbed an average of 3 cents per pound.
ABS makers have benefited from moderate increases in demand after several years of overcapacity, according to industry consultant Austin Peppin.
"The [ABS] market is as tight right now as it's been in several years," said Peppin of Peppin & Associates in Chesterfield, Mo. "But ABS producers still need more increases to see real margin improvement."
ABS makers are taking that advice. Market leader GE Plastics of Pittsfield, Mass., announced a 7 cent-per-pound increase effective Jan. 17, while second-ranked Bayer Corp. of Pittsburgh has a similar increase set for Feb. 1.
Third-ranked Dow Chemical Co. of Midland, Mich., wants to boost prices of automotive and pipe-fittings grades by 5 cents per pound Jan. 17 and prices on other grades by 7 cents per pound Feb. 10.
GE, Dow and Bayer each also are trying to raise prices for their polycarbonate/ABS alloys by 8 cents per pound. The increases are effective on the same dates as their ABS jumps.
Bayer had sought a 7 cent increase last fall, but most processors contacted said they settled on the 5 cent amounts originally nominated by GE and Dow, even though those firms later raised the amounts of their increase attempts to match Bayer's.
Although the GE and Dow increases were aimed at the high-volume commodity grades, several processors reported seeing increases spill over into other injection molding grades, including those used in the automotive market.
Industry observers said the new round of increases may be in anticipation of BASF Corp.'s entry into the North American ABS market with a 260 million-pound-per-year styrenics plant set to open next month in Altamira, Mexico. Officials with Mount Olive, N.J.-based BASF have said the plant's impact on North American ABS and styrenics prices will be limited since much of its output will be exported.
In PVC, Houston-based Shintech Inc.'s decision to raise prices 2 cents per pound on Feb. 1 — rather than on Jan. 1 as other major producers had planned —is bringing to light a potential change in price enforcement.
Officials at Oxy Vinyls LP of Dallas and Formosa Plastics Corp. USA of Livingston, N.J., said they planned to push their increases through in early February, as they normally would under conventional 30-day price protection.
Under standard agreements, resin buyers don't begin to pay a new price until 30 days after an increase actually is announced. This would mean Shintech's Feb. 1 increase attempt normally would not go through to buyers until March 1.
But an abnormally tight market is changing the rules of the game, and is likely to allow Shintech to try to push its Feb. 1 increase through in early February.
"Supply is so tight that [PVC makers] are eliminating price protection and extra-special conditions like rebates and early-pay discounts," Formosa PVC business director David DiPiero said.
"The normal patterns of the past may be changing," said Barry Hendrix, Oxy Vinyls' vice president of sales.
DiPiero estimated the industry's level of inventory, which is normally between 30 and 60 days, currently is at a level "significantly less" than 30 days.
"We're basically shipping everything we're producing," he said.
Market conditions have even led Oxy Vinyls to alter its maintenance schedule at its massive Pasadena, Texas, plant. The company, which ranks first in North American PVC production, had planned to take the plant down for two weeks in early 2000, but now will divide the work into smaller outages done over several months to keep production levels high.
"Changing their maintenance plan will keep [Oxy's] costs up, because they'll have to rent equipment and pay contractors each time they bring them in," one executive said. "PVC producers usually like to just shut the plants down and get it done."
PVC prices have climbed 16 cents per pound since the start of 1999. For pipe-grade resin, that equals an increase of 64 percent.