Reacting to Hurricane Katrina, average North American selling prices for polyethylene, polypropylene and PET bottle resin are shooting upwards.
The most drastic change is in PET, where major producers have put in place a 16 cent-per-pound surcharge, which is set to run through the month of September. Supplies of PET feedstocks ethylene glycol and paraxylene have been disrupted by the hurricane, which rocked major refineries on the Gulf Coast on Aug. 29.
A refinery operated in Pascagoula, Miss., by Chevron Phillips Chemical Co. LP had been a major supplier of paraxylene. The extent of damage to that plant remains unknown.
A Tennessee-based PET buyer is not convinced the 16 cent surcharge will be gone when October rolls around.
``I don't know if [PET makers] will have everything up and running and have the material they need by then,'' he said.
This week's Plastics News pricing chart is showing a net gain of 19 cents per pound on PET bottle resin. That move includes:
* The 16 cent surcharge.
* 5 cents out of a total of 7 cents announced in increases for August and September.
* 2 cents in additional price erosion that occurred in May and June.
PE makers also have hammered through another 7 cents in per-pound price increases after getting 6 cents each on Aug. 1 and Sept. 1.
According to a Sept. 14 Department of Energy report, natural gas is being produced at only 35 percent of its per-hurricane levels. That is a big deal for North American PE, since about 70 percent of the ethylene used to make PE in the region is derived from natural gas.
Major PE makers already have another 5 cent-per-pound increase nominated for Oct. 1.
``At this point ... we have no choice but to ask our customers to pay more for our products in order to safeguard their supplies into the future,'' Dow Chemical Co. Chief Executive Officer Andrew Liveris said in a Sept. 15 news release. In the release, Liveris addressed the potential impact of escalating energy and feedstock costs on the U.S. chemical industry.
``With oil and natural gas prices at astronomically high levels and showing no signs of receding, the U.S. chemical industry faces the very real risk of being unable to invest in its own future in this country,''Liveris added.
In PP, a 5 cent-per-pound increase has taken hold since Sept. 1, with another 6 cents set to hit the market Oct. 1. A number of PP buyers expressed concern with PP supply, in light of damage suffered to Dow's major PP works in Hahnville, La.
Demand for PP - as well as for PE and PET bottle resin - had been on the rise for six to eight weeks before the hurricane, after sluggish first-half sales led to reduced prices across the board.
Resin prices had been on an almost nonstop upward run in 2003-04 as feedstock costs skyrocketed and demand continued to grow.