Prices for suspension PVC and solid polystyrene resins have kept their momentum going in the first half of 2002.
Suspension PVC prices have climbed an average of 2 cents per pound since May 1 and now stand an average of 8 cents above where they were at the start of the year. Major producers now are working on additional 4 cent-per-pound increases set for June 1.
Solid PS prices have jumped an average of 3 cents per pound since April 1, with additional 4 cent-per-pound increases going through to some buyers since May 1. Not counting the 4 cent May 1 move - which was not confirmed by a majority of buyers recently contacted by Plastics News - solid PS prices have risen an average of 6 cents per pound this year. Additional 4 cent increases are on the PS table for July 1.
The PVC supply climate continues to be somewhat tight, due in part to chlorine production being restricted by a depressed caustic-soda market. As a result, supplies of feedstock vinyl chloride monomer have been limited.
With several industry contacts saying caustic prices appear to be on the rise, the PVC supply situation could be loosening. Even so, industry analyst Pat Duke of Houston's Dewitt & Co. consulting firm said it could take a while before PVC processors see any improvement in supply.
``There's going to be a good three-month window going into August and September before [supply] starts to loosen,'' Duke said. ``Processor inventories right now are below five days, which is an extremely low number.''
For now, some processors are feeling the pain, with a Midwestern PVC buyer lamenting that he received barely half of his resin order in May.
``There's no extra resin out there to be had,'' he said. ``Part of it is the caustic problem and part of it is strong export pricing.'' Several sources said resin shortages outside North America have hampered efforts to supplement local suppliers as the North American construction season gets into high gear.
The construction market, which had maintained a good deal of strength in the recent economic downturn, appeared to lose some steam in April. New-housing starts dropped more than 5 percent when compared with March, while new-home sales rose only 1 percent, according to the National Association of Home Builders.
That trend was reflected in first-quarter sales numbers for the U.S./Canadian PVC market. Total domestic sales climbed almost 4 percent, but gains in the pipe market grew only 1 percent, according to the American Plastics Council in Arlington, Va.
But if new construction has slowed, remodeling-related products continue to see growth. Sales of PVC into siding were up 20 percent in the first quarter, while sales into extruded windows and doors grew more than 17 percent. Combined, those two areas accounted for almost 20 percent of first-quarter sales.
``We're seeing the housing remodeling and replacement market holding strong, which isn't what we thought we'd see late last year,'' another Midwestern PVC buyer said. ``Consumers are focused at home instead of putting their money wherever else they were putting it.''
In PS, prices have climbed in spite of a gap between sales gains reported by APC and anecdotal reports by processors.
According to APC, first-quarter sales of solid and expandable PS soared more than 10 percent in the United States and Canada. Sales to resellers and compounders were up 37 percent, while sales into food packaging were up almost 12 percent. Combined, those segments accounted for more than 27 percent of all first-quarter sales.
But several processors reported their sales levels were flat or slightly up compared with the same quarter in 2001, leading some industry contacts to believe much of the PS market's 2002 growth can be attributed to restocking of inventories that were severely depleted in late 2001.
``There's definitely some restocking, but it's going on throughout the chain, with our customers and with their customers as well,'' said Jeff Denton, North American PS business manager for Dow Chemical Co. of Midland, Mich., which ranks as the region's second-largest PS maker.
The bottom line, however, is that processors are buying more PS, a trend that's led Dow to limit some accounts that tried to purchase more resin than specified in their sales contracts.
``We're not on allocation, but we're scrutinizing requests for more resin on an account-by-account basis,'' Denton said.
Styrene monomer shortages from early in the year have lessened, but upcoming maintenance shutdowns for production of that vital PS feedstock could keep PS supplies tighter than expected through the summer, industry sources said.
Sales into the appliance market continue to be strong, while sales into traditional PS food-service uses like plates, cups and bowls were stronger than expected. That increase was helped by a strong Memorial Day weekend, which Denton said might have resulted from parties fueled by post-Sept. 11 patriotism.
``The last time we saw a jump in demand like we saw this Memorial Day was in late 1999 when everyone was planning millennium parties,'' he said. ``It's hard to imagine that something like that can pick up an entire market, but it really can.''