Polypropylene makers got most of what they wanted in January, while polyethylene makers apparently will have to wait a month for their first price increase of the new year.
Meanwhile in the PET market, producers hammered through the remainder of a major fourth-quarter pricing move.
PP prices have climbed 3 cents per pound since Jan. 1. Producers had sought 5 cents, but a slight increase in available material and a slow start to the year by some processors that had holiday shutdowns contributed to the partial increase, according to industry sources.
The 3 cent move comes after PP makers won a remarkable 26 cents in price increases during 2004. Strong demand and tightening supply - combined with high feedstock and energy costs - caused prices to rise about 50 percent.
Through November, U.S./Canadian PP demand was up almost 7 percent, according to the American Plastics Council in Arlington, Va. Subtracting export sales, the domestic market grew almost 6 percent.
``There's been no weakening in demand and supplies are still pretty tight,'' a Chicago-area PP buyer said. ``I think the resin makers are going to keep asking for more increases. If they need 5 [cents], they'll say 8.''
Major North American PP makers now are working on increases of 3 cents per pound, with an announced date of Feb. 1.
In PE, producers informally slid a 5 cent-per-pound hike back from Jan. 1 to Feb. 1. Sources said some PE makers are combining the 5 cents with a 4 cent move originally announced for Feb. 1, but many buyers expect the Feb. 1 attempt to be for only 5 cents, with the 4 cent attempt moving to March 1.
Slower demand - especially from export sales - contributed to the delayed January increase. Numerous buyers also reported that they chose not to draw down their inventories in December as they normally would, reducing the need to buy in January.
``There have been more rail cars [of resin] available lately,'' a Texas-based PE buyer said. ``I don't know if the export market is going to be able to repeat what it did last year, and that means there will be more material available in North America.''
Another Texas-based buyer credited PE makers with better control of market supplies, but added that he has received more calls from secondary brokers in recent weeks - a sign of increased availability, he said.
A New York-based PE buyer was less sympathetic.
``I've had it with these increases,'' he said. ``[PE makers] are basically demanding them and not cutting us any slack. That's hurting our business.''
The lift in pounds and prices for PP and PE made for a very successful 2004 for Dow Chemical Co. of Midland, Mich., which ranks among the largest polyolefins makers. Dow's plastics unit - including PE, PP and polystyrene - witnessed a sales increase of 29 percent to just over $10 billion last year. The unit's pretax profit more than doubled, to $1.7 billion. Selling prices for the unit's products jumped 24 percent in 2004, even though its volume in pounds was up 5 percent.
Nova Chemicals Corp. of Pittsburgh enjoyed similar results in its olefins/polyolefins unit, which turned a $255 million profit last year after earning only $18 million in 2003. Sales for the unit, which includes North America's third-largest linear low density PE business, were up 26 percent to $3.2 billion. Volume was up 9 percent to 3.3 billion pounds.
High feedstock prices, strong demand and no sign of additional supply prompted market analyst Kevin McCarthy of Bank of America Securities in New York to dub 2005 ``The Year of the Resin Producer.''
``We expect resin margins to continue to rise, irrespective of the underlying volatility in feedstock costs,'' McCarthy said in a Jan. 18 industry report. McCarthy expects first-quarter prices and margins to increase for PE, PP, PS, PVC and PET.
``The margin outlook in the first quarter of 2005 appears positive, given low producer inventories, moderate downstream inventories and tight supply/demand balances,'' he said.
A production outage at a Shell Oil ethylene plant in Deer Park, Texas, also could play a role in future pricing on both ethylene and PE, market watchers said. The site produces about 3 percent of North America's ethylene and will be operating under force majeure conditions for three to four months.
Through November, U.S./Canadian sales for 2004 were up 7 percent for LDPE, 9 percent for LLDPE and 12 percent for high density PE, according to APC.
Out PET way, a fourth-quarter pricing blitz left prices up 15 cents for the quarter and as much as 30 cents on the year for some buyers.
``Demand has been really strong and there's no new supply set until 2006,'' a Texas-based buyer said. ``The [PET] resin makers are trying to recover margin while they can.''
But one PET executive said the industry did not realize any margin growth until December.
2004 ``was still a pretty tough year,'' said Mark Adlam, PET business director for M&G Group, a Houston firm that ranks third in North American PET capacity. ``A lot of what we did was keeping up with feedstock costs. We still have a very tight supply situation.''
Adlam estimated North American PET demand grew 8 percent in 2004. Growth in 2005 could be amplified by new soft drink roll-outs, continued strength in bottled water and new sheet products for bakery products and fresh fruit, he said. Soft drinks once again led North American PET consumption in 2004 with a 43 percent market share.
Market leader Eastman Chemical Co. of Kingsport, Tenn., posted 23 percent growth in its polymers business in 2004, with sales surpassing the $2.2 billion mark. Those totals mostly come from PET, but also include the firm's PE business.
Eastman's plastics growth in pounds checked in at 8 percent last year, but its operating profit dropped to $25 million after delivering $62 million in 2003. Officials said the decline occurred because increased sales volume and higher selling prices were ``more than offset'' by higher raw material and energy costs.
In addition to showing the price increase, Plastics News is correcting its prices for PET bottle resin this week on its resin pricing chart. While acknowledging the 15 cent fourth-quarter hike, the chart also is revising prices downward by 10 cents per pound, resulting in a net upward change of 5 cents. The 10 cent correction reflects price erosion, rebates and discounts that occurred from 2000-02, not recent market activity.
