North American selling prices for polyethylene and polypropylene each dropped an average of 4 cents per pound in January, as demand did not pick up as anticipated after a slow end to 2005.
Several PE and PP buyers contacted also said they are working off supplies of foreign material they purchased in late 2005 out of concern that domestic suppliers could not meet their needs because of hurricane-related reasons.
Selling prices for PE now are down an average of 8 cents per pound since Dec. 1. Prices had jumped an average of 32 cents after the hurricanes blew through the Gulf Coast, knocking out large amounts of capacity for raw materials needed to make PE, PP and many other plastics.
Domestic resin production now is approaching normal operating rates, ``but we just don't need it right now,'' a Texas-based PE buyer said.
At Equistar Chemicals LP, a major high density PE maker in Houston, fourth-quarter 2005 PE sales volumes were down almost 14 percent to 1.25 billion pounds. For the full year, Equistar's PE sales volumes were down more than 6 percent to 5.3 billion pounds, but higher selling prices pushed Equistar's 2005 sales of ethylene and derivatives - including PE - up 31 percent to $12.2 billion.
Major PE makers have responded to the January price drops by nominating price increases of 5 cents per pound for March 1.
In PP, prices also dropped an average of 4 cents per pound as buyers worked off late-year inventories even as demand slowly ramped up. North American PP prices now are down an average of 9 cents per pound since Dec. 1. They had climbed an average of 19 cents since Aug. 1.
``We've got a decent forecast for [PP] growth this year, but polyolefins have tended to bounce up and down over the last several years,'' said Bob Dennett, PP market analyst with Chemical Market Associates Inc., a consulting firm in Houston. ``A lot of it is inventory-based. In some years, you see a lot of destocking.''
Dennett said it is unclear if improving January demand was the result of seasonal inventory building or if it was a pre-buying reaction to aggressive price hikes announced by major PP makers.
Most major PP producers have announced a total of 10 cents in hikes for February. The attempts are split between 4 or 7 cents Feb. 1, and 6 or 3 cents Feb. 15.
At commodity plastics giant Dow Chemical Co., global sales volume in pounds for plastics - including PE, PP and polystyrene - was down 1 percent in the fourth quarter and flat for the year. At Midland, Mich.-based Dow. Full-year plastics sales were up 18 percent to $11.8 billion.