Polyethylene and polypropylene makers are squeezing more pennies out of their price-increase efforts.
PE makers pushed through the final 2 cents of a 5 cent-per-pound increase originally announced for May 1. Some buyers were able to resist taking the final 2 cents until mid-June, and even later in a few extreme cases. PP producers got an average of 1 cent per pound out of a 3 cent-per-pound move they had slated for June 1.
As a result, prices for high density PE are up an average of 10 cents per pound on the year, while prices for low and linear low density PE are up an average of 12 cents per pound, according to several buyers and producers contacted recently. On the year, PP prices are up an average of 9 cents per pound.
``Prices have gone up because the [PE] producers have done a good job of controlling inventory without shutting down major lines,'' an Indiana-based PE buyer said. ``And there's no new capacity coming on that would affect supply.''
John Hotz, vice president of PE at Nova Chemicals Inc. of Pittsburgh, echoed that comment, saying PE makers ``have been cautious about cranking up production'' since some of their customers remain ``a little skittish'' about purchasing.
That cautious approach kept operating percentage rates in the low- to mid-80s in July, according to Hotz.
Through April, U.S./Canadian sales were up for HDPE, LDPE and LLDPE, according to the American Plastics Council in Arlington, Va. Sales of HDPE were up more than 9 percent, while LDPE sales climbed more than 7 percent and LLDPE sales were up more than 2 percent.
The export market played a major role. Factoring out export growth of 46 percent, the domestic LDPE market actually fell more than 1 percent. In HDPE, export growth of 56 percent accounted for almost half of its total growth.
The impact was just the opposite in LLDPE, where a 14 percent drop in export sales dampened a 5 percent domestic growth rate.
Looking at end markets, LDPE sales were boosted by a gain of more than 6 percent in nonfood-packaging film. HDPE benefited from a jump of almost 10 percent in sales into blow molded liquid-food bottles, while a 10 percent gain in nonfood-packaging film lifted the LLDPE total.
``There's been a fair amount of demand growth in film,'' Nova's Hotz said. ``But there's been fundamental demand growth across the broader market, including applications in injection molding and blow molding.''
Producers now are working to implement additional 5 cent-per-pound increases. A recent letter from Equistar Chemicals LP pushed the effective date of the increase back to 60 days after the previous increase, meaning the Houston-based firm could attempt the move anywhere between July 1 and Sept. 1. Several competitors, including ExxonMobil Chemical Co. and Chevron Phillips Chemical Co. LP, soon followed Equistar's move, according to industry sources.
However, several buyers contacted said demand had slowed in recent weeks, throwing the fate of the new increase up in the air.
``We've been getting more deals offered to us lately,'' a Texas-based PE buyer said. ``Demand's not where it was earlier in the year.''
In PP country, slowing demand allowed producers to win only a penny of their latest increase attempt. In spite of that concession, PP prices are up an average of 9 cents per pound on the year. That translates into increases of almost 30 percent to date on injection molded grades of homopolymer and copolymer PP.
U.S./Canadian PP has enjoyed a banner year for sales as well through April, according to APC. Sales were up almost 10 percent, including gains of almost 33 percent in injection molded housewares and almost 41 percent in injection molded cups and containers.
All of that is taking place in a market that was considered severely oversupplied heading into 2002. Nevertheless, operating percentage rates hovered in the low 90s in July.
``I don't know how [PP makers] have tightened inventories to get to that high of an operating rate,'' an industry contact said. ``There's been some pre-buying in front of the price increases, but consumer-products companies are caught in the crossfire with the big retailers, so I don't know how they can afford to pay more for resin.''
Producers are working to pass a round of 3 cent-per-pound increases, but several buyers said they are skeptical on its chances, especially in light of the mixed results of the previous attempt.
On the capacity front, Phillips Petroleum Co. now is not expected to start production at its new, 700 million-pound-capacity plant in Linden, N.J., until late this year.