Although demand for polypropylene and PET bottle resin has not suffered as much as some other commodity resins, overstocked supplies still led prices for each material to drop an average of 2 cents per pound in July.
PP prices now are down an average of 6 cents per pound from the start of the year, while PET bottle resin makers have given back 2 cents of a 7 cent-per-pound increase they had won earlier.
Unlike most commodities, PP has shown a slight sales increase of 0.5 percent through May, according to the American Plastics Council in Arlington, Va.
Industry analyst Bob Dennett chalked up most of PP's strength to a big boost in export sales, which had climbed almost 41 percent through May.
``What's saved polypropylene is that exports are up a ton,'' said Dennett of Houston-based Chemical Market Associates Inc. ``There's been a lot of material going to Europe and Mexico and even to Asia.''
Subtracting exports from the mix, North American demand is off almost 3 percent, which is not encouraging with more than a billion pounds of new capacity set to fire up in the second half of 2001. The completion of an expansion at Formosa Plastics Corp. USA's plant in Point Comfort, Texas, will bring about 300 million more pounds into the market, while the launch of a Dow Chemical Co./Tosco Corp. plant in Linden, N.J., represents almost 800 million pounds of annual capacity.
Industry sources said the Dow/Tosco plant is unlikely to go into full production this year. It is likely that the plant will be fired up briefly late in the year for accounting purposes, then shut down.
Sources added that ExxonMobil Chemical Co. has been particularly active in exporting PP to Asia in order to seed the market for a new plant the firm recently opened in Singapore.
Dennett places current PP operating rates at 80-85 percent and added that he does not anticipate any real recovery in the market until 2003.
And PP buyers are expecting more price drops yet to come in 2001.
``Packaging is still strong,'' a Chicago-area PP buyer said. ``But 1 percent growth isn't enough to raise prices.
``There's so much capacity out there that producers can make 4-5 percent more product overnight if they wanted to. These new [PP] plants were built to fit an 8 percent [annual] growth rate, and when you don't get it, this is what happens.''
Sales into injection molded rigid packaging applications offered PP makers a slight ray of hope, showing an increase of almost 14 percent through May. Injection molded rigid packaging - including cups, containers, caps and closures - accounted for almost 13 percent of domestic PP sales through the first five months of the year, according to APC.
In PET, haggling over the 7 cent increase began shortly after it went through to buyers in May.
``I don't think [it] was a good number to begin with,'' an East Coast-based buyer said. ``The bottlers weren't happy with it from the start.''
North American PET growth in the first half of 2001 checked in at about 2-3 percent, according to several producers and buyers contacted. That includes numbers that were flat to slightly down in the powerhouse carbonated soft drink sector and strong growth of roughly 20 percent in bottled water.
``The overall economic slump doesn't appear to have affected PET too much,'' said Tom Sherlock, PET business director for DAK Americas, the Charlotte, N.C.-based firm that took over DuPont's PET resin business in June. DAK is a unit of Alpek SA de CV, a petrochemicals firm based in Mexico City.
Tod Durst, PET sales manager for Nan Ya Plastics Corp. USA in Livingston, N.J., described the North American PET market as ``slightly oversupplied but getting tighter.''
``In the last six weeks, we've seen warmer temperatures throughout the country, which should help sales numbers for [carbonated soft drinks],'' Durst said.
Although several buyers said Asian PET has been more available in North America this year, Durst said material from that region does not pose a long-term threat to North American suppliers because supplies often are unreliable.