After big price run-ups in recent months, average selling prices for polystyrene and PET bottle resin are heading back down again.
North American PS prices have dropped an average of 3 cents per pound since Dec. 1, according to several buyers contacted recently. Prices had jumped 10 cents per pound since Aug. 1, as regional markets reacted to shortages connected to Hurricanes Katrina and Rita.
Seasonal demand has slowed, while prices for feedstocks used to make PS also are dropping. Regional PS makers also are returning to operating rates similar to those they had before the hurricanes struck the Gulf Coast, sources said.
Through September, North American PS sales were down 5 percent when compared to the same period in 2004, according to the American Plastics Council in Arlington, Va. Those numbers include a substantial loss in sales and production caused by Hurricane Katrina, which hit in late August, seriously constraining supply and delivery options.
Sales of PS into electrical and electronics uses took a sizable hit, dropping almost 7 percent through September. Sales of expanded PS also were down about 11 percent. PS sales into food service - accounting for almost 40 percent of total domestic sales - eked out a 1 percent gain in the period.
Prices of PS feedstock benzene also have dropped from early-year levels of $4 per gallon to recent listings of $2.20, lowering prices for styrene monomer along the way.
``Benzene and styrene are dropping and inventories are being rebuilt,'' said Pat Duke, a market analyst with DeWitt & Co. consulting firm in Houston. High PS prices ``have encouraged more imports of finished goods and less demand for [domestic] pellets - but that gap's going to close with lower polystyrene prices.''
In PET, producers have pulled back 10 cents after implementing a hefty surcharge and additional price increases since Aug. 1. Those moves had combined to lift prices an average of 19 cents per pound since Aug. 1.
Now, increased availability of PET from export markets - along with lower prices for paraxylene and ethylene glycol feedstocks - are lowering average selling prices. The market's also going through its typical late-year demand slowdown, as beverage demand softens.
Moving forward, North American PET processors ``will have to buy more offshore resin to have an escape valve,'' according to DeWitt market analyst Edgar Acosta.
``They can't go through this again,'' Acosta said, referring to hurricane-related resin shortages.
Wellman Inc. recently restarted one of its PET production lines at its storm-ravaged plant in Bay St. Louis, Miss. Industry sources said the firm plans to restart its second line there later this month, and could add a much-delayed third line in late 2006.
Adding to the North American supply situation in 2006 and 2007 will be new capacity from market leader Eastman Chemical (770 million pounds) and Invista (440 million). M&G Group also will open a billion-pound-capacity plant in Brazil in 207, affecting PET trade flows in the region.
Overcapacity in China - where Acosta estimated that more than 2 billion pounds of capacity currently is idled - also will affect the availability and demand of domestic material.