Makers of suspension PVC and PET bottle resin took different paths to raise prices in April, but both got the job done.
The PVC market's remarkable turnaround from oversupply to near-shortage levels continued as prices rose an average of 2 cents per pound in April, making it three consecutive months that prices have climbed by that amount.
Another 2 cent move is on the table for May 1, with producers upping the stakes with a 4 cent move announced for June 1.
Caustic soda, a material not involved in PVC making, is playing a big role in that market nonetheless. Depressed caustic markets are leading to lower production of chlorine, resulting in less vinyl chloride monomer available to make PVC.
The crunch isn't quite a shortage, said buyers contacted recently, but it is leading to discomfort for some PVC users.
A PVC buyer in the Southeast claimed four large PVC pipe makers recently were put on allocation by their suppliers. Each pipe maker also had its monthly order reduced 25 percent by PVC makers that could not meet demand.
The Southeast buyer said some of his own PVC deliveries have been delayed as long as a week, as PVC makers work to supply their customer bases.
``The PVC guys are being offered cash for resin,'' the buyer said. ``Finished pipe inventories have really been drawn down in the last three months and there's a need for material.''
Many industry contacts speculated that the year-plus fallow period for PVC profit has pushed producers to the brink - and contributed to the bankruptcy of Borden Chemicals and Plastics LP - leaving them with little choice other than to raise prices as quickly as they can in hopes of building margin.
``Since late 2000, I've never seen it so bad for so long, as far as profit goes,'' one buyer said. ``There's been a lot of blood.''
Sales of PVC in the United States and Canada through February were up more than 2 percent compared with the first two months of 2001, according to the American Plastics Council in Arlington, Va.
U.S. and Canadian PVC sales into rigid pipe and tubing - which accounted for about 44 percent of domestic consumption - were up 2.4 percent. Sales into siding and related uses - with a 15 percent domestic market share - were up more than 21 percent through February.
On the capacity front, the PVC market tightened in March when Borden closed about 500 million pounds of capacity in Geismar, La.
In PET, the 5 cent uptick coincided with the market's usual strong, pre-summer demand push, as well as with increases in price for key feedstocks paraxylene and ethylene glycol, said Todd Murray, strategic planning manager for KoSa, a Houston firm that ranks second in North American PET production.
``We saw a high-single-digit demand increase in the first quarter, and the second quarter is traditionally strong from a demand perspective,'' Murray said in a recent telephone interview. ``Some [PET users] were refilling the inventory pipeline, but there was also quite a bit of new sales.''
An East Coast PET buyer said the successful price increase was part of the PET market's ``normal busy season.''
``There's no shortage, but it's that time of year again,'' the buyer said, adding that he thought there would be more resistance to a 3 cent move nominated by major PET makers for June 1.
No major new North American PET capacity is on tap for 2002, but as much as 300 million pounds of capacity could be added as KoSa and other producers convert unprofitable PET fiber capacity over to resin use.
Much-ballyhooed introductions of Coca-Cola Co.'s vanilla-flavored Coke and Pepsi Blue, a blue-colored, berry-flavored carbonated drink from PepsiCo Inc., may gain publicity, but may not have a big effect on PET resin sales into the carbonated soft drink market, according to KoSa's Murray.
Although carbonated soft drinks make up PET's largest end market, the sector has averaged low-single-digit growth for the past few years. A color gimmick worked for PepsiCo last year, when it successfully launched Code Red, a red version of its popular Mountain Dew carbonated drink.
``Pepsi has been very clever with new products and has been able to capture an uptick in each quarter - it's kind of like purple ketchup,'' Murray said. ``I think vanilla Coke is coming from that same mind-set.''
``There will be some new sales,'' he added. ``But there will also be cannibalization of the core [Coke and Pepsi] products.''
