The early-year swoon continues in the polyethylene market, with per-pound selling prices dropping an average of 4 cents in March.
The move marks the fourth consecutive month that PE prices have fallen 4 cents. The change affects all grades of high, low and linear low density PE and is shown on this week's Plastics News resin pricing chart.
Market sources cited lower-than-expected demand and solid inventories as reasons for the drop, which followed a 32 cent surge between August and December. That big run-up was caused by hurricane-related shortages.
``The [PE] demand we're seeing out there [in early 2006] is still weak, especially on the film side,'' said Mike Burns, a PE analyst with Resin Technologies Inc., a resin-buying consultancy based in Fort Worth, Texas.
``There's high inventory in the chain and the amount of finished [PE] products coming in from outside of the region has been increasing,'' Burns added. ``There's nobody out there willing to take a large number of cars [of resin] at any price, because they think the market could still go down.''
A major PE buyer on the West Coast said the North American market ``doesn't appear to be tightening.''
``There was a lot of restocking of both resin and finished goods after the hurricanes,'' the buyer said. ``And there's been a lot of polyethylene bags arriving on the West Coast.''
Hurricane-related anxiety - with some buyers getting only 50-60 percent of their orders in September and October - led to ``beyond-normal'' inventory buildups in late 2005, according to Dave Anderson, a market analyst with Townsend Polymer Services & Information Inc. in Houston.
``Processors didn't want to get caught again with low inventory,'' Anderson said. ``A lot of them had ordered material from overseas resin suppliers for the first time. Now that resin is here and that's part of what [processors] are working off.''
Major PE makers now are working to raise prices on May 1, by either 3 or 6 cents per pound, depending on the supplier. But few buyers or market watchers expect a full increase to go through on that date. Many expect further price erosion in April and possibly more in May.
Prices for natural gas - a feedstock used to make 70 percent of North American PE - also remain relatively low, although high on a historical basis. The material was trading at $6.90 per million Btu on April 5, representing a drop of about 7 percent from the same date in 2005.
Overall U.S./Canadian sales of HDPE fell almost 6 percent in 2005, according to the American Plastics Council in Arlington, Va. Sales of LDPE from the region were down 5 percent, while sales of LLDPE dipped almost 2 percent in that time period.