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March 19, 2001 01:00 AM

PE, PVC makers push through price hike

Frank Esposito
Senior Staff Reporter
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    Polyethylene and PVC makers were able to raise prices again in February, but it wasn't easy.

    PE makers had to settle for half of the 6 cent-per-pound increases they had sought Feb. 1. Sources said a March 12 announcement from market leader ExxonMobil Chemical Co. of Houston officially reduced the increase to 3 cents per pound. An executive at a rival producer said he was disappointed with ExxonMobil's action.

    "Blow molders were accepting the full increase, and injection molders were beginning to accept it," the executive said. "[Exxon's move] was more based on the linear low density [PE] market than on high density."

    PE sales director Bob Buesinger of Chevron Phillips Chemical Co. LP said early-year demand has been so strong that his firm has been unable to meet some HDPE orders after pulling down inventory in late 2000.

    "The pipe and geomembrane markets have been really strong," Buesinger said. "This is their busy season."

    However, several processors said demand at their businesses reflects an overall slowdown in the U.S. economy and isn't strong enough to support the full 6 cent increases.

    "The market isn't really tight right now," a Texas-based PE buyer said. "The first [5 cent] increase in January got through on economic reasons, because producers really needed help, but getting all of the second one was just blue sky."

    "Demand is really slowing down right now," a South Carolina-based PE buyer said. "The increases were coming too fast and were too high."

    ExxonMobil's move has thrown 5 cent per-pound increases set for March 1 up in the air. It's unclear if ExxonMobil and other producers now will seek 3 cents or 5 cents in March. Processors said they aren't anticipating any increase this month because of the demand situation and the reduction of the 6 cent February increase.

    PE makers still are hoping to bounce back from a disappointing 2000 sales year, when plummeting second-half sales all but erased first-half gains.

    Final 2000 sales statistics from the American Plastics Council of Arlington, Va., showed U.S. and Canadian LDPE sales down 0.4 percent, while HDPE was up 1.6 percent and LLDPE up 4.2 percent — well below the growth rates they had posted in recent years.

    In PVC, a majority of processors contacted reported that the full 3 cent-per-pound increases were going through for February, but a vocal minority was reporting that only 11/2 cents had gone through.

    Plastics News is showing the full 3 cents on this week's resin pricing chart, though a number of processors said they still are working to negotiate at the 11/2 cent level through discounts or rebates.

    "If [PVC makers] would go after a penny and a half each for February and March, they'd be able to get it, no problem," a Midwest PVC buyer said. "But going after all 3 at once is going to cause us a lot of problems. I don't know if we'll be able to pass this on to our customers."

    The PVC pipe market, PVC's largest-single end use, was encountering some inventory problems of its own, which in turn was affecting the resin world. Some small to midsize pipe makers were working off inventory or pulling back production to limit new inventory, while some large pipe producers reportedly were running full throttle in a move that could hurt profitability for smaller firms.

    PVC makers are seeking additional 2 cent-per-pound price hikes effective March 1. U.S. and Canadian PVC sales fell almost 5 percent in 2000, according to APC.

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