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June 14, 2004 02:00 AM

PVC, acrylic resin prices rise

Frank Esposito
Senior Staff Reporter
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    Continued price pressure on raw materials lifted suspension PVC prices an average of a penny per pound in May, while the same factors have increased average per-pound selling prices for acrylic resins by an average of 18 cents per pound since late 2003.

    The increases are reflected on Plastics News' resin pricing chart this week.

    The PVC move was influenced by higher prices for feedstocks natural gas and crude oil, as well as by strong and sustained demand from the construction industry, according to Barry Hendrix, a vice president with PVC maker Oxy Vinyls LP of Dallas.

    ``We're still selling a lot of material into the construction market,'' Hendrix said in a recent phone interview. ``We expect construction to be strong for an extended period.''

    Industry sources said operating rates for PVC and vinyl chloride monomer feedstock both were above 90 percent in North America. Overall U.S./Canadian PVC sales were up more than 2 percent through March, according to the American Plastics Council in Arlington, Va. PVC prices now are up an average of 9 cents per pound - almost 23 percent - on the year.

    West Texas intermediate crude oil was trading at more than $37 per barrel June 8, after peaking above $40 earlier in the month and being below $32 a year ago. Natural gas was around $6.10 per million Btu on June 8, little changed from a year ago, but well below the $4.50-$5 range some market watchers thought it would be in at this point.

    But a Midwestern PVC buyer cautioned that recent rainy weather in that part of the country could slow construction work, resulting in lower PVC demand and increasing inventories of PVC pipe, which accounts for about 60 percent of U.S./Canadian PVC use.

    Other industry sources said the explosion that killed five people and knocked out 200 million pounds of PVC capacity at the Formosa Plastics Corp. USA plant in Illiopolis, Ill., in late April has not affected the broader market, since most of that plant's output was in specialty grades.

    In acrylics, extreme tightness in feedstocks methyl methacrylate and acetone have ratcheted prices up about 18 cents per pound - almost 20 percent - since late 2003. Producers pushed 10 cents in increases through in November and followed up with an 8 cent move in early May. Another 5 cents is on the table for late June.

    ``There's more global demand for MMA than all the MMA makers in the world can produce,'' said Steve Ferrero, automotive account manager for Cyro Industries, a Rockaway, N.J.-based firm that ranks second in North American acrylic capacity.

    Ferrero said most of the explosion in MMA demand can be traced to high-definition televisions, which are consuming massive amounts of acrylic resin at plants in Asia. Demand has been so great that North American acrylic makers are exporting material into that region, Ferrero added.

    MMA precursor acetone also is in short supply. What makes the acrylic situation even more troublesome, according to Ferrero, is that the industry's profit margins have been so low in recent years that producers such as Cyro and market leader Atofina Petrochemicals Inc. of Houston have been unable to reinvest in new capacity. As a result, the current high-price environment could continue.

    ``There are some debottleneckings scheduled in MMA, but they won't even make a dent,'' Ferrero said. ``The industry basically needs one new plant every year to keep up with demand, but there's nothing coming up.''

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