Like desperate rock-climbers searching for something to hold on to, makers of PVC and polyethylene resins have reversed lengthy price declines by pushing through early-year increases on their products.
PVC prices have climbed an average of 2 cents per pound since Feb. 1, while prices for all grades of high, low and linear low density PE are up an average of 3 cents per pound since Jan. 1. These changes are reflected on this week's Plastics News resin pricing chart.
Buyers and producers alike said PVC makers were under pressure to raise prices, since margins fell throughout 2001. That pressure was magnified when demand for caustic soda plummeted, creating more of a need for integrated chlorovinyl firms to get cash from their PVC units. Depressed aluminum and paper markets fed the caustic drop, sources said.
``The resin guys are saying they don't have the inventory and short-term demand is there, but I don't know where things will be a month from now,'' one Midwest PVC buyer said.
Major PVC makers now are working on a pair of additional 2 cent increases with effective dates of March 1 and April 1. Barry Hendrix, PVC business director for market leader Oxy Vinyls LP of Dallas, said resin inventories at his firm were ``very low.''
``We began the year with low inventories in the whole chain,'' Hendrix said. ``There's been some restocking and that's led to tightening in supply.''
On the supply side, the North American PVC market could be affected by the possible shutdown of Borden Chemicals and Plastics LP's 475 million-pound capacity plant in Geismar, La. (See story, Page 19.)
Several buyers expressed hope that federal funds recently released for major water infrastructure projects will fuel PVC pipe demand in the next few years. Rigid pipe and tubing accounted for about 45 percent of all U.S. and Canadian PVC sales in 2001, according to the American Plastics Council in Arlington, Va.
One buyer estimated that as much as $1.5 billion in government funding could be available for such projects. Oxy Vinyls' Hendrix agreed there's a ``megatrend'' showing a large need for infrastructure work.
``On the 10- to 20-year horizon, there's a relatively large number of government-sponsored projects,'' he said. ``Ductile iron pipes are wearing out or leaking. The country just needs it.''
The PE increase also was fueled by margin-related desperation on the part of producers.
``The [PE] producers just put their foot down and said, `If you're gonna order, you're gonna pay,' '' a buyer in the Southeast said. ``[The increase] may not be justifiable from the supply/demand side, but it is from the blood side, the margin side.''
An Ohio-based PE buyer said demand at his business picked up somewhat in January and February, with gains in pharmaceuticals and cosmetics, even though the agricultural market remained soft.
Bob Beil, North American polyolefins commercial director for PE market leader Dow Chemical Co. of Midland, Mich., agreed that January and February were ``strong demand months,'' adding that getting the increase through was a matter of survival.
``Prices had gotten to the point where the economic pain threshold was more than the industry could bear, even at lower operating levels,'' Beil said.
Resin inventory levels have dropped to the point where any sudden ramping up in demand - such as processors attempting to buy in advance of further increases - might find PE makers short of material, he added.
The convoluted status of additional increase attempts may have buyers scratching their heads. Most major PE makers - with the exception of Chevron Phillips Chemical Co. LP of Houston - had announced 4 cent-per-pound increases for Feb. 1 or Feb. 15.
Chevron Phillips then countered with a 2 cent move for HDPE set for Feb. 15, prompting Dow to alter its attempt to 2 cents for HDPE and 4 cents for all other PE and push back its effective date to March 1.
At press time, it was unclear if other PE makers would match Dow's strategy.
