Needing to restore margins and keep up with raw material increases, makers of solid polystyrene and PET bottle resin have increased prices for their products in recent weeks.
Solid PS prices jumped an average of 4 cents per pound in February after experiencing a similar increase in January, according to several buyers and producers contacted recently.
PS supplies have been tightened by reduced supplies of styrene monomer feedstock, according to John Siegrist, styrenics vice president for market leader Nova Chemicals Corp. of Pittsburgh. A number of firms that had delayed maintenance turnarounds on their styrene monomer operations now have them under way or planned for later this year, Siegrist said.
``If you look at 2002 and 2003, [PS] demand was down and producers pushed out their maintenance turnarounds in order to conserve capital,'' he added. ``Now they're doing [the turnarounds] at a very appropriate time, with the economy improving and ... when inventory is very low in the chain.''
High prices for benzene, which is used in styrene production, also are playing a role, according to Siegrist and Pat Duke, a market analyst with DeWitt & Co. consulting firm in Houston.
Benzene prices were around $1.40 per gallon in November, but jumped to $2 per gallon in March, Duke said.
``Benzene is through the roof. It's tied to the run-up in crude oil,'' Duke said, adding that this year's PS price increases ``aren't demand-driven.''
``It's all cost push and margin recovery,'' he said. ``And margin recovery isn't where it needs to be, even with prices as high as they are.''
PS makers now are working on additional 3 cent-per-pound increases that were set to take effect March 1. PS demand in the United States and Canada was down almost 4 percent in 2003, according to the American Plastics Council in Arlington, Va., but Siegrist said Nova expects the market to bounce back and show growth of 3-4 percent in 2004.
In PET, producers pushed through 3 cent increases in January and now are working hard on 6 cent-per-pound increases for March.
Although a number of buyers said they already had seen the 6 cent move, others said they still were negotiating. Only the 3 cent January increase is shown on this week's Plastics News resin pricing chart.
``Raw materials have been the key driver'' in the increases, according to Todd Murray, planning director for PET maker Kosa Inc. of Houston. Supplies of PET feedstocks paraxylene and ethylene glycol also are tight, said Chase Willett, a market analyst with the Chemical Market Associates Inc. consulting firm in Houston.
An East Coast-based PET buyer said the increases also are being boosted by a lack of lower-priced Asian material in recent months. Supplies of that material have diminished as feedstock costs in that region have gone up.
``The small guys are really feeling the heat,'' the buyer said. ``Brokers are getting lots of calls for foreign resin, but they don't have any.''
The increases come as the PET market is working to absorb substantial capacity increases brought on last year by M&G Group in Altam¡ra, Mexico; and by DAK Americas Inc. in Charleston, S.C. However, that oversupply has not stopped prices from rising.
``In any commodity market, capacity doesn't always come on at a time when it's matched up with demand,'' Willett said. ``But beyond those two projects, there isn't any new [North American] PET capacity to be added for quite a while.''
Kosa's Murray said export sales also have been strong so far in 2004, partly because of European tariffs on material from several Asian countries. A coalition of North American PET makers are working to have duties put back in place on material from some of those Asian nations as well.
Murray and other market contacts cited 12-ounce bottles as an area of potential growth in PET's dominant beverage market in 2004. The smaller bottles might take some market share away from 20-ounce PET bottles, but mostly they are displacing aluminum cans.
Industry sources estimated North American PET demand growth at 4-7 percent in 2003.
