PVC resin prices rose again in February, while polyethylene makers delayed a 5 cent-per-pound hike that had been set for Feb. 1.
The PVC move added 2 cents to prices that already had moved up 2 cents in January. Industry contacts cited solid demand, high natural gas prices and tightness in supplies of PVC feedstock vinyl chloride monomer as reasons for the success of the increases. Tight VCM supplies have led PVC maker Georgia Gulf Corp. of Atlanta to delay a planned three-week maintenance shutdown until later in the year, company officials said.
``There have been some capacity issues that have limited the supply of VCM and of chlorine as well,'' a Texas-based PVC buyer said. ``We're also seeing some growth in commercial construction, which has increased PVC demand.''
A Midwestern PVC buyer questioned the wisdom and timing of the increases.
``The PVC makers are pushing too hard, too fast,'' the buyer said. ``If you look at the history of the market, whenever there are increases like this, the price will suddenly come to an abrupt halt and drop like a rock.''
Increases in prices of ductile iron also have helped the PVC increases take hold by making iron less competitive with PVC, sources said.
Since the start of 2002, North American pipe-grade PVC prices have soared more than 60 percent, according to the Plastics News resin pricing chart. On the demand front, U.S./Canadian PVC sales were down more than 2 percent in 2003, according to year-end statistics from the American Plastics Council in Arlington, Va. Sales into the dominant rigid pipe and tubing market - which accounted for 45 percent of all domestic sales in 2003 - were up almost 1 percent.
Georgia Gulf's chlorovinyls unit - including PVC, VCM, chlorine, caustic soda and ethylene - posted sales of about $1.16 billion in 2003, an increase of almost 15 percent compared with 2002. But the unit's profit dropped almost 25 percent to less than $87 million in that time frame. Chlorovinyls generated about 80 percent of Georgia Gulf's total sales in 2003.
In PE, softening demand and lower levels of pre-buying have prompted resin makers to delay 5 cent-per-pound increases until March 1 or April 1.
``From November through February, there was a huge run-up in inventories,'' an Ohio-based PE buyer said. ``People went over and beyond their needs, so you had artificially high demand. Pent-up demand wasn't there. Now [PE processors] are in maintenance mode, at best.''
Buyers ``moved back on inventory'' in February, according to Roger Schwartz, PE business director for Dow Chemical Co. of Midland, Mich., but Schwartz said the drop-off in February was not as great as Dow had expected.
``We expected February to be a soft month, but it was still fairly respectable,'' Schwartz said. ``I'm more encouraged at this point in 2004 than I was in 2003.''
Jeff Taylor, PE vice president at Westlake Group in Houston, said PE demand should be normal in March. Taylor added that there is ``not a lot of inventory overhang'' in the North American market, leaving open the possibility of the 5 cent increase attempt returning.
PE buyers, however, are hoping that moving out of the core winter months - when consumption of PE feedstock natural gas is at its highest - will prevent prices from moving upward again. As of March 5, supplies of natural gas in underground storage were 55 percent higher than they were at this time last year, according to the Department of Energy.
For full-year 2003, U.S./Canadian sales of low and linear low density PE each were down about 3 percent, while sales of high density PE dipped about 2 percent, according to APC.