The unrelenting wave of post-hurricane resin price increases is continuing, with polyethylene and PVC each absorbing further shocks since Oct. 1.
PE prices went up another 5 cents per pound, bringing the total upsurge to 24 cents since Aug. 1. That's a leap of about 40 percent on blow molding grades of high density PE for the dairy market. Increases worth another 8 cents have been announced for Nov. 1.
The PVC uptick is even more dramatic - a 12 cent move that hit Oct. 1, after a 2 cent hike had moved in Sept. 1. Those 14 cents represent an increase of about 25 percent on pipe-grade PVC.
For both materials, it's coming down to basic supply and demand. Supplies were low and demand was rising in the weeks before Katrina and Rita pounded the Gulf Coast. Now supply is even lower as a result of refinery outages, taking away the raw materials that resin plants need to make their product.
According to Chemical Market Associates Inc., a consulting firm based in Houston, 31 percent of North American HDPE capacity remained shut down as of Oct. 3. For low density PE, the shut-down number was 34 percent, and for linear LDPE, 45 percent. Almost 36 percent of production for ethylene feedstock - needed to make PE and PVC - also was down, a CMAI report said.
Some 9 percent of regional PVC capacity was down on that date, according to the report, as well as 13 percent of chlorine capacity and almost 19 percent of vinyl chloride monomer feedstock capacity.
At the same time, transportation has descended into a muddled frenzy, with rail shipments delayed and many available trucks being leased or rented by the U.S. government for disaster relief efforts.
``This is clearly a situation nobody had expected,'' said Dick Mason, controller at Houston-based Shintech Inc., the region's largest PVC maker. ``Our costs for raw materials and logistics are going up a substantial amount.''
Shintech has declared force majeure for PVC made at its plants in Addis and Geismar, La. Several PVC buyers reported being placed on allocation of as little as 50 percent of their standard orders.
A Midwestern PVC buyer pointed out that a number of construction projects in his region already were selecting wide-diameter pipe made of ductile iron because of the higher prices for PVC and limited availability of material needed to make plastic pipe.
In PE, the steady drumbeat of increases has left many buyers looking for answers, with some on allocation as low as 40 percent.
The latest 5 cent move was enforced by PE makers Dow Chemical Co., Nova Chemicals Corp. and Equistar Chemicals LP on Oct. 1. ExxonMobil Chemical Co. and Chevron Phillips Chemical Co. LP had the same move set for Oct. 15, but industry watchers said the effective date was Oct. 1 for the whole industry.
``The [PE] producers really have us over a barrel,'' a Texas-based PE buyer said. ``They know we can't go to another producer and find material.''
In turn, resin makers are pointing to continued high costs of raw materials needed for production. Natural gas, used in 70 percent of North American PE production, was selling Oct. 6 for more than $14 per million British thermal units.
The material cost less than $7 a year ago.