Average per-pound selling prices for polyethylene, polypropylene and PVC continued to drop in June and July, as processors worked off inventories and producers coped with weak demand.
North American prices for all three of those materials have dropped an average of 2 cents per pound since early June. PE and PP already had slid 2 cents off of their peak, while PVC had dipped a penny.
``You have to be optimistic in this business,'' said Grant Thomson, North American PE business director for PE maker Nova Chemicals Inc. of Pittsburgh. ``There's the possibility of an uptick in demand this fall, and it looks like the overall economy is starting to pick up.''
``[PE feedstock] natural gas is still expensive, but it's under $5 [per million Btu], so we hope to gain some margin there,'' Thomson added.
Not all processors shared Thomson's enthusiasm, however. A PE buyer based in the Chicago area said sales from existing customers were down in the first half of the year, and anticipated new sales were late.
``Sales in some of these markets - like food, health care and medical - don't replace themselves later in the year,'' the buyer said. ``If you miss it, you miss it. It's not like buying a car, where you might wait and still make the purchase.''
Through May, U.S./Canadian sales of high and low density PE each were down almost 8 percent compared with 2002, while sales of linear LDPE were off almost 9 percent, according to the American Plastics Council in Arlington, Va.
The natural gas situation also continues to bedevil North American PE makers, since the product is used as a feedstock for 70 percent of North American PE production. Dropping below $5 per unit may bring month-to-month relief, but that price is still $2 higher than it was a year ago and well above the $1.80-$2.20 range natural gas occupied throughout the 1990s.
At Nova, Thomson said the firm also is finding some encouragement in the growth of its Advanced Sclairtech line, which offers an enhanced version of PE. Advanced Sclairtech now accounts for more than 20 percent of production at Nova's massive, 3.5 billion-pound-per-year plant in Joffre, Alberta.
In PP, buyers reported another 2 cent dip as they chose to work off material that had been purchased in advance of price increases rather than increasing current orders.
``Demand over the summer months has been soft, so we've curtailed production to control inventories,'' a Midwestern PP buyer said. ``There's also been some raw-material cost reduction in propylene monomer, so that's brought prices down.''
U.S./Canadian PP sales slipped almost 5 percent through May, according to APC. Sales of PP into rigid packaging - including cups, containers, caps and closures - offered a bright spot, with growth of almost 5 percent. Rigid packaging accounted for almost 14 percent of domestic PP demand through May.
For PVC, the price loss comes during a time when the construction market - which consumes massive amounts of PVC pipe and siding - typically is strong. But wetter-than-normal conditions in the Midwest and East Coast have curtailed activity.
Some PVC buyers think the weather situation could lead to a stronger fall season, as contractors work to complete housing projects that are behind schedule.
``Housing demand has been there, but the East Coast in particular has been very wet, so nobody could do anything,'' a Texas-based PVC buyer said. ``With the weather easing up, [builders] might be able to get caught up.''
But Pat Duke, a market analyst with DeWitt & Co. in Houston, said a fall spike could provide only a short-term gain if interest rates continue to rise, as they have done in recent weeks.
Continued higher rates ``could pull the plug on a part of the economy that's been holding up pretty well,'' Duke said.
Through May, U.S./Canadian PVC sales were down almost 7 percent, according to APC. That includes a drop of almost 4 percent in PVC sales into rigid pipe and tubing. That end market accounted for almost 46 percent of domestic demand through May.
The lull in demand also means that the PE, PP and PVC markets are not likely to see much impact from production that was lost when Hurricane Claudette struck Formosa Plastics Corp. USA's plant in Point Comfort, Texas, on June 15. The site - which produces all three of those resins - was out of commission for a couple days, but soon resumed production. Production of PE and PVC were restarted within a week of the storm, while PP production had been relaunched by the end of July.
Operating capacities at North American PE, PP and PVC plants remained well under 90 percent as of late July, according to several industry sources.
Even with pricing under downward pressure, producers are working on additional price increases, all set to take effect Aug. 1. PE makers are seeking 5 cent- per-pound hikes, while PP makers are looking for another 3 cents and PVC makers are seeking another 2.
Many buyers said they were skeptical as to how much, if any, of these increases would take hold, especially in light of the weak demand scenario.