Selling prices for PVC and polyethylene resins are continuing their unlikely upward climbs, with each moving ahead since early March.
PVC in particular has done a near-total turnaround since late 2001, moving from oversupply to increasing tightness, due in part to a collapse of the caustic soda market.
The elimination of some capacity operated by bankrupt Borden Chemicals and Plastics LP and already-low industry operating rates also have played a role in the success of the 2 cent-per-pound move PVC makers pushed through in March. A similar move took hold in February, and identical attempts are on the table for April and May.
With caustic sales down because of depressed paper and aluminum sectors, production of feedstock vinyl chloride monomer has been limited, leading to less of that material being available for PVC production, industry sources said.
``This [PVC] resin shortage is really a VCM shortage,'' one Midwestern PVC buyer said. ``There's a lot of pipe capacity available, but there's no place for caustic soda.''
Borden closed its Geismar, La., plant in mid-March, taking 475 million pounds of annual capacity out of the North American market. Operating rates also are rumored to be low at the 600 million-pound-capacity plant in Addis, La., that Borden recently sold to Shintech Inc.
Those losses should be offset by the billion pounds Shintech has added in Plaquemine, La., since late 2000 - as well as U.S. and Canadian sales growth of only 2 percent in 2001 - but the ramping up of PVC processing for the spring construction season has left some PVC buyers anxious.
``It looks like PVC makers sold too much of their inventory and now might get stuck with not enough,'' an East Coast PVC buyer said. ``A couple of pipe makers have lines down, and others are just trying to build inventory to get through the [construction] season.''
In PE country, a convoluted pricing scenario led to an average increase of 2 cents per pound on high, low and linear low density PE, although some small and midsize LDPE and LLDPE buyers were invoiced for a 4 cent increase.
The uptick comes after 3 cent moves took hold in February. Producers and processors reported increased first-quarter business on the whole, but were unable to discern between inventory building and new business.
The pricing tumult was touched off when Chevron Phillips Chemical Co. LP, a leading HDPE maker and a smaller player in LDPE and LLDPE, issued 2 cent-per-pound increases for March 1 on all three products after other competitors had sought 4 cent jumps.
Dow Chemical Co. then tried to implement 2 cent moves on HDPE and 4 cent hikes on the other categories, but the 2 cent genie was already out of the bottle.
Dow, Equistar Chemicals LP, ExxonMobil Chemical Co. and Chevron Phillips each now have additional 5 cent moves announced for April 15 or May 1. Chevron Phillips issued a 5 cent hike for May 1, but also snuck in a 3 cent increase for April 15.
Lower-than-normal operating rates could cause any slight uptick in PE demand to appear magnified, a condition that also could cause some anxiety among PE buyers thinking about buying ahead of future price increases, industry contacts said.
The current PE market is ``a combination of tight supply, producer pressure and high feedstocks,'' said Jose Rovira, a market analyst with Phillip Townsend Associates consulting firm in Houston.
``It's also likely that there's some pre-buying going on,'' Rovira added. ``And producers are issuing new increases because they were able to improve their profit margins a little bit [in February and March], but not as much as they wanted to.''