Prices for polyethylene, polypropylene and PET bottle resin continued to slip in late 2001 as excess capacity swamped lukewarm demand.
Meanwhile, Basell Polyolefins announced Jan. 10 it is closing its linear low density PE and ultrahigh-molecular-weight PE works in Lakes Charles, La., eliminating about 250 million pounds of capacity. The move will eliminate as many as 200 jobs at the site by mid-2004.
PE prices dropped an average of 3 cents per pound in November and December. On average, PE prices fell 6 cents per pound in 2001, taking into account early year price increases that later were given back.
Although PE makers currently are trying to raise prices 3 cents per pound, soft prices for feedstocks such as ethylene and natural gas are taking away some of their leverage. Natural gas, for instance, was trading Jan. 8 at about $2.40 per million Btu, compared with the price of nearly $10 it commanded a year ago.
Many PE makers originally announced the increase at 5 cents.
PE makers ``had to back off the increase because of the raw material situation,'' a Chicago-based PE buyer said.
``There's oversupply and virtually no cost pressure,'' a Midwestern buyer said of the PE market, adding that his firm's PE orders for January would be down 5-10 percent from their year-ago levels.
PE makers have worked to control supply by taking some capacity out of the market. In addition to the Basell move, Dow Chemical Co. previously announced that it had idled about 600 million pounds of high and LLDPE capacity in Seadrift and Freeport, Texas, while Chevron Phillips Chemical Co. LP closed 300 million pounds of HDPE capacity in Orange, Texas.
But a number of buyers said they had not felt any impact from those moves yet. Several added that prime material is available at wide-spec prices to help producers reduce their inventories.
``We're being offered material below our contract price,'' an Ohio-based PE buyer said. ``The quality of wide-spec is very good right now.''
Executives at Houston-based PE makers Equistar Chemicals LP and Atofina Petrochemicals Inc. said they have seen positive signs in the early weeks of 2002 that could indicate a rebound.
``We've seen a definite increase in volume,'' said W. Norman Phillips, Equistar's senior vice president of polymers. ``If buyers continue to restock their inventories, it's not out of the question we could see double-digit improvement this year.''
``Inventories at both producers and converters are at low levels,'' Atofina PE business director Kevin Boyle added. ``When demand returns in mid-2002, there will be a real need to increase inventory.''
U.S. LDPE sales were down 10 percent through October, with LLDPE down 4 percent and HDPE off 5 percent, according to the American Plastics Council in Arlington, Va.
In PP, prices dropped another 2 cents per pound in November and December as producers gave back small price increases they had won in the fall. For the year, PP prices slipped an average of 7 cents per pound as severe overcapacity hampered producers' efforts to build margin.
As with PE, PP capacity has been idled in an attempt to improve the market. British Petroleum plc recently shut down 450 million pounds in Alvin, Texas, and Huntsman Corp. did the same with a 60 million-pound line in Odessa, Texas. Basell NV continues to idle 420 million pounds in Bayport, Texas.
But the North American market still is oversupplied by at least 1 billion pounds, even without counting a new, 700 million-pound plant that Phillips Petroleum Co. is set to open in Linden, N.J., in the first half of 2002.
The 2 cent-per-pound increase that had been enforced in fall 2001 quickly dissipated as PP makers scrapped for market share.
``Everyone's moving at different paces in polypropylene,'' a Chicago-based buyer said. ``There are six or seven suppliers all moving up and down at different times. It's utter confusion and total disarray.''
A Midwestern PP buyer added that the confusion can allow processors to be ``very selective.''
``If you're a spot buyer, you can go negotiate every order separately and get some ridiculously low deals,'' he said.
U.S./Canadian PP sales are up more than 4 percent through October, according to APC, due in part to a whopping 36 percent upswing in export sales. Sales for domestic use are up less than 2 percent.
PET bottle resin prices have dipped 7 cents per pound since August, according to buyers contacted recently.
Although no major PET capacity expansions are under way, industry sources said smaller debottlenecking operations have added to capacity and kept pricing soft.