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April 17, 2000 02:00 AM

PE, PS prices extend upswing

Frank Esposito
Senior Staff Reporter
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    The pricing tide continues to rise for polyethylene and polystyrene in early 2000. Prices rose an average of 3 cents per pound on high, low and linear low density PE in March, while PS prices ticked up an average of 4 cents per pound, according to processors and resin makers contacted recently.

    The PE move is part of a continued rebound from a 3 cent drop that hit the market in late 1999 and early 2000.

    "I don't know if we'll see any relief," said a PE buyer in the Southeast. "We've tried to buy ahead of the increases and weren't able to."

    "I've got 30 hours of resin left to run on one of my machines," an East Coast-based PE buyer said. "We're tracking the [rail] car [from our supplier] to see when it'll get here."

    The tightness in material supply has led many to believe that the minislump in pricing was more a function of inventory shedding — partly linked to the nonevent of Y2K — than of any dip in demand.

    "The mentality of the market turned in February," said a PE processor in Illinois. "A lot of [processors] thought the market was going to fall 10 cents and wondered what happened."

    Several processors expected prices to fall in step with crude oil prices, which dropped from more than $30 per barrel to the mid $20s in recent weeks. But ethylene and PE prices have not fallen, and now PE makers are attempting to push their advantage by working on 5 cent-per-pound- increase attempts had been scheduled for April 1.

    The late March explosion at Phillips Petroleum Co.'s K-Resin plant in Pasadena, Texas, forced Phillips to halt HDPE production for a week, but that outage is not expected to have much of an immediate impact on supply, according to several processors.

    Resin makers are hoping for solid growth in 2000, even if it falls short of the 9-11 percent growth rates HDPE and LLDPE enjoyed in 1999. Most industry officials are looking for growth rates of 4-5 percent, but industry consultant Bill Wood said those numbers "may be generous."

    "2000 could be a lackluster year in polyethylene," said Wood, an analyst with Mountaintop Economics & Research Inc. in Colrain, Mass. "The overall economy is probably going to taper back, and that's going to affect the demand for consumer goods that use polyethylene. Polyethylene demand growth could drop to 1 or 2 percent.

    "The first quarter could be pretty good, but interest rate increases are going to catch up to the economy," he added.

    In PS, producers hammered through 4 cent-per-pound increases, prodded on by rising costs for styrene monomer and healthy demand.

    "There aren't too many places to go if you want to buy a lot of polystyrene," a Massachusetts-based PS buyer said, while a Missouri-based PS buyer added that one of his PS suppliers recently asked if he was willing to reduce his monthly order by 10-20 percent.

    PS operating rates may be seeing the effect of integrated styrenics businesses making more profit by selling styrene monomer on the spot market rather than using it for PS production, industry contacts said. Scheduled maintenance turnarounds at a number of styrene monomer plants won't help the situation improve any time soon, sources said.

    The Phillips incident also could affect the PS market, since processors that had blended K-Resin — a styrene butadiene copolymer — with standard PS probably will switch completely to PS, according to the Missouri buyer. That could add more than 300 million pounds of demand to the PS market.

    Most PS makers are seeking additional 3 cent increases effective April 1. But a New York-based buyer warned that excessive increases could lead PS users to look elsewhere.

    "We're at the point where we're looking at polypropylene and other alternative resins," the buyer said. "Polypropylene [performance] might not be a lot better than polystyrene, but because of pricing it would be better in the short term."

    "[Polystyrene] is primarily a disposables market, and people aren't going to pay 80 cents for a disposable plate," the Massachusetts buyer added. "At that point, they're looking at washing their old plates."

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