Average North American selling prices for suspension PVC and solid polystyrene have continued to drop from their late 2005 highs.
Since Jan. 1, per-pound prices for suspension PVC have dropped a total of 2 cents, after already falling 2 cents in December. Several buyers contacted by Plastics News said they saw most of this second 2 cent drop in February.
Before the December drop, suspension PVC prices had climbed 14 cents in the previous four months, owing to hurricane-related shortages and high raw material costs. PVC makers now are seeking to stop the slide with increases of 2 cents per pound set for April 1. Those attempts have been pushed back from an original date of March 1.
``The [PVC] resin makers didn't really make money right after the storms, but as soon as natural gas [prices] started going down, their profits went right up,'' a Midwestern PVC buyer said.
Although some buyers remain skeptical of the April increase attempt, business is picking up in the construction market, which accounted for almost 70 percent of U.S./Canadian domestic PVC sales in 2005. Buyers reported increased activity in the southeast U.S. and a higher rate of quote requests from building contractors in recent weeks.
Construction market watchers have predicted that the surging U.S. housing market will slow down for several years now. Early 2006 has offered mixed messages, with a red-hot January followed by a slower February, according to government data. But a recent survey by the National Association of Home Builders reported lower confidence among its members.
``Rising interest rates and high rates of home-price appreciation have raised the bar for homeownership to beyond what some families can reach,'' NAHB chief economist David Seiders said in a news release.
The Midwestern buyer said North American PVC pipe makers are following the lead of resin makers and controlling their production and inventory more tightly. Fear of losing market share or of being caught short in construction season traditionally has prompted pipe makers to run full out. But now some are opting to take that chance in exchange for higher profits, particularly in the parts of Texas, Louisiana and Mississippi that are rebuilding after being hit by hurricane weather.
The hurricanes made a tough year in PVC sales even tougher in 2005. Total U.S./Canadian PVC sales dropped 3 percent, including a 2.5 percent drop in domestic sales, according to the American Plastics Council in Arlington, Va. In spite of the overall weakness, sales into rigid pipe and tubing were up almost 3 percent, and sales into extruded windows and doors were up almost 5 percent.
In PS, prices continued to fall in January and February, adding another 3 cents total to a 3 cent price drop seen in December. Makers of solid PS had raised prices 10 cents per pound since Aug. 1 in the wake of the hurricanes.
The drop occurred even as prices for benzene - a key element in PS feedstock styrene monomer - rose to almost $3 per gallon in February. PS market watchers contacted by Plastics News said that situation could give some help to increases of 6 cents per pound nominated by PS makers for March 1.
Early 2006 PS demand was reported as a bit soft after PS makers made it through a challenging demand year in 2005. According to APC, North American PS sales were down 6 percent for the year, with a similar drop in domestic sales.
Even with that decline, PS sales into food service - the largest North American end market with a share of almost 40 percent in 2005 - squeezed out a demand gain of almost 1 percent.