The incessant drum roll of price increases has grown silent in the North American polyethylene and PVC markets, with prices dropping since early September.
PE had secured increases of 10 cents per pound on high density material and 12 cents per pound on low and linear low density through August. After a relatively flat September, a penny rolled off prices in October, according to several buyers and industry sources contacted recently.
PVC prices had catapulted up 14 cents through August - a jump of more than 50 percent for pipe-grade material - until slowing demand caused declines of a total of 2 cents per pound in September and October, sources said.
Several PE buyers reported an increase in offers for near-prime or pencil-prime material from brokers and resellers, suggesting that resin makers had used those channels to rid themselves of excess material.
Business in PE film slowed considerably, with film extruders experiencing difficulty in passing resin price increases on to customers.
``You can get through two increases, but you're not going to get a third,'' said a major Midwestern buyer of film-grade PE.
Some resin makers - including Chevron Phillips Chemical Co. LP of Houston - are working on previous price increases from Oct. 1 and new 2 cent increases for Dec. 1, but many buyers are interpreting these moves merely as a means of limiting price erosion.
There's also growing concern among PE buyers about the potential impact of a U.S. war with Iraq. During the Persian Gulf War of 1991 resin prices flew up quickly, only to fall just as fast when it became evident the war would be brief and would have little impact on oil supplies. But there's no guarantee that scenario would repeat itself in 2002 or 2003.
``The war situation with Iraq is having a psychological effect on buyers and sellers,'' a major East Coast PE buyer said.
``That's why these resin makers are keeping their price increases on the table and are resisting dropping prices. The war is the joker in the deck.''
Through August, U.S./Canadian HDPE sales were up almost 7 percent vs. 2001, while LDPE sales had climbed 6 percent, according to the American Plastics Council in Arlington, Va.
Sales of HDPE into liquid-food bottles were up 13 percent vs. 2001 in that period. Sales of LDPE into nonpipe extrusion were up 16 percent.
But an executive at a major PE maker disputed the price drop, saying October sales were ``pretty busy,'' leading to difficulty in his firm meeting some orders on time.
``We're running close to flat-out,'' the executive said.
``Natural-gas prices also have climbed from $2.50 to $4.50 in the last couple months and that's kept pressure on feedstock costs.''
PVC prices lagged as pipe makers cut production in the face of growing uncertainty that the residential housing market would continue its robust growth. Business in commercial construction began to soften several months ago, sources said.
``The pipe guys are pushing back on pricing,'' a Midwestern PVC buyer said.
``There's been lower demand, and that could lead to another penny or two [in erosion] by the end of the year.''
A second Midwestern PVC buyer was concerned about reduced government spending on infrastructure projects.
``Housing starts alone won't keep the [PVC] pipe industry going,'' the buyer said. ``States and cities and counties are having money problems and they're not building highways.
``That's significant because every mile of highway requires four miles of pipe.''
Lately, more spot resin also has surfaced in the PVC market, sources said. Speculation on increased production from plants that Formosa Plastics Corp. USA and Shintech Inc. acquired from now-bankrupt Borden Chemicals and Plastics LP also has buyers expecting the flow of material to increase.
Several industry sources indicated that Formosa is ready to relaunch commodity production in Illiopolis, Ill., in late 2002 or early 2003, and that Shintech is prepared to do the same in Addis, La.
APC reported a 5.5 percent jump in U.S./Canadian PVC sales through August. That includes an upward burst of 13 percent in PVC sales into siding applications.
