Pricing pressure continued to lift polyethylene and polypropylene markets in May, with producers intent on recovering monomer increases and improving profit margins.
Prices for high, low and linear low density PE have climbed an average of 3 cents per pound since May 1, according to several buyers contacted recently. Producers had sought increases of 5 cents per pound, but had to settle for 3 cents in most cases. A small segment of buyers contacted reported seeing the full 5 cents, but the 3 cent move is reflected on this week's Plastics News resin pricing chart.
This week's chart also is reflecting an additional 2 cents per pound in price increases for LDPE and LLDPE that have taken hold since late March. Although it initially appeared that LDPE and LLDPE markets would climb only 2 cents per pound at the time, several large film producers later confirmed that a full 4 cents stuck.
As a result, HDPE prices are 3 cents higher on this week's chart, while LDPE and LLDPE prices are 5 cents higher. For the year, HDPE prices have soared an average of 8 cents per pound, while LDPE/LLDPE prices have rocketed an average of 10 cents per pound.
But many buyers reported that the deluge of price increases has not been matched by demand for their products, which is flat to slightly higher compared with the first half of 2001.
``There's a lag in the reality of what's going on,'' a Pennsylvania-based PE buyer said. ``I'm not sensing much of an increase in demand.''
First-quarter U.S./Canadian resin sales numbers tell a mixed story for PE. HDPE sales were up almost 6 percent and LDPE sales were up more than 1 percent compared with the same quarter in 2001, but LLDPE sales slipped almost 3 percent, according to the American Plastics Council in Arlington, Va.
PE sales were propped up in the first quarter by restocking of inventories that processors depleted in late 2001, while in the second quarter they were buoyed by pre-buying in the face of further price increases.
``There was a feeding frenzy on pre-buying early in the second quarter, but now buyers are saying, `Let's wait a little bit and see what happens,' '' a Chicago-based PE buyer said.
``Polyethylene pricing is very sloppy right now,'' added Howard Rappaport, a market analyst with Chemical Market Associates Inc. consulting group in Houston. ``There's been collective optimism on the part of [PE] producers for the last three or four months - and economic indicators are showing a slow, steady recovery - but the [PE] market is going into its slow summer season.''
Major producers now are working on additional 5 cent-per-pound increases set for June 1. A similar round of increases has been announced for July as well.
A buyer in the Southeast, however, said he has seen a sign that demand may be slowing down.
``Some of our resin suppliers are asking for their rail cars back because they need to store resin,'' he said. ``That means they haven't sold what they've produced.''
In PP, prices have moved up an average of 3 cents per pound since May 1 and now are up an average of 8 cents per pound on the year.
Although the PP market has been oversupplied for much of the past two years, recent monomer price increases, as well as maintenance turnarounds in monomer production, have tightened the market in recent months. BP plc's idling of 575 million pounds of capacity in Baytown, Texas, this month - after it did the same with 450 million pounds of capacity in Alvin, Texas, last year-also has affected PP supplies and buyers' expectations.
``Producers have had roughly 18 months of depressed pricing,'' a Chicago-based PP buyer said. ``They can't take any more reduction in margin, so if a customer refuses to take a price increase, [PP makers] are walking away from that business.''
U.S./Canadian PP sales jumped almost 7 percent in the first quarter of 2001 compared with the same period a year ago, according to APC. Sales into injection molding applications - ranging from appliances to consumer products and automotive parts - grew more than 14 percent in the first quarter, when the injection molding market accounted for more than one-third of domestic PP sales.
Major PP producers now are working on an additional round of 3 cent-per-pound price increases for June 1.