PVC
The North American PVC market also is looking at a good chunk of new capacity in late 2007 and 2008, but resin executives aren't losing sleep over it.
``Most of the adjustment [for the new capacity] has already been done,'' said Brad Esckilsen, PVC marketing director for Formosa Plastics Corp. USA of Livingston, N.J. ``Contractors already are cutting back on housing starts. They know they need to work off excess inventory.
``We knew the market for residential construction was going to be down,'' he added. ``But there's more work coming from commercial and municipal projects.
``Commercial projects like hotels, office space and retail are up 10 percent in the last year. There's been underinvestment there and in municipal projects like schools, hospitals and water systems in the last few years, so it's coming back and that should continue into 2007.''
Through July, U.S./Canadian PVC sales were flat vs. the same period in 2005, according to APC, but sales into the dominant rigid pipe and tubing sector were up almost 3 percent.
``Pipe tends to drive the market,'' said Kallman. ``It's an integral source of sales, but siding has suffered this year. The open-ended question is, when does the new capacity become an effective factor in the marketplace. We'll have to see producers look for additional markets to balance out if housing is down.''
Esckilsen contends that demand should be stronger in the second half of 2006 as inventory is drawn down. Demand growth should finish the year at around 2 percent and should be close to GDP levels - around 3 percent - in 2007.
Average per-pound prices for PVC lost about 4 cents in early 2006, but have won back 2 cents since Aug. 1 and are battling to get another 2 cent increase that was set for Sept. 1.
``We had higher [PVC resin] prices coming into 2006, but then prices came down until both [buying and selling] sides started tightly controlling their inventories. As a result, we didn't see the impact of overall demand until May,'' Esckilsen said.
Longer-term, the PVC market has plenty of room to grow in construction, and may even gain back sales into flexible PVC products that are being imported from Asia, according to Esckilsen.
``Between 2000 and 2030, 70 percent of American housing stock will need to be replaced,'' he said. ``Capital outlays are expected to continue unless they're deterred by higher interest rates.
``And if you look at the cost of goods from China, it's going to create an upward push on flexible PVC, because the cost structure there is increasing on labor, electricity and transportation.''
Nylon
North American nylon resin producers are working to steer clear of the downward vortex affecting their biggest end market - the automotive industry, where North America's Big Three are closing plants and bleeding money.
Overall North American nylon sales were flat through July, but sales into the auto sector plunged more than 12 percent, according to APC.
``We're seeing global nylon growth of 4-6 percent, but some factors in automotive aren't looking so good,'' said Dave Donofrio, Americas regional business and marketing director for nylon leader DuPont Co. of Wilmington, Del.
``It depends on the share-shift between traditional domestic [auto] suppliers and new domestic suppliers, which are transplant companies,'' he added. ``Traditional domestic suppliers use more plastic in their vehicles. If there's share-shift, that means less plastic usage.''
``I'd have to say automotive is most of the [nylon] effect,'' said Resin Technology analyst Greg Smith. ``Nylon fiber sold into the housing market for carpet had been doing pretty good, but now it's definitely trailing off. There's some strength in smaller markets like film and electronics.''
Smith added that even though fewer cars are being built in North America, nylon makers can work for more penetration per vehicle, particularly in smaller injection molded parts.
In North America, Donofrio said that DuPont is doing work with nylon in rocker covers and sealed engine covers, which are already established in Europe. Powertrains are at the top of the firm's agenda in the Asia-Pacific region.
``There seems to be a lot of interest in small-part metal hybrids for auto under-hood components and also for very large parts like front-end modules,'' he explained. ``These are developmental, but they should be ready in the next year or two.''
The market also has been challenged by cost measures, even though prices have climbed an average of 20 cents per pound on both nylon 6 and 6/6 resins in the last year. RTI's Smith expects prices to be flat to slightly down in 2007.
``We're trying to protect margin as best we can, but it's a very volatile cost environment,'' Donofrio said. ``Aside from fundamental changes in energy, there's growing tightness in [nylon feedstocks] adipic acid, [hexamethylene diamine] and caprolactam.
``It won't directly affect supply, but it will impact cost. As caprolactam gets tight in a commodity model, costs will go up.''
On the high-temperature end, DuPont is introducing several new grades and ``doing a lot of commercial work,'' he said. The company also is introducing higher-productivity nylons with faster cycling times and higher flow that now are being commercialized.
Polycarbonate
Changes in the way people are listening to music and watching movies - basically, buying vs. downloading - continue to impact the North American PC market.
Regional sales of optical media-grade PC - used in CDs and DVDs - were soft in early 2006, but began to pick up as the year went on, according to Roger Rumer, PC business director for PC maker Bayer MaterialScience LLC of Pittsburgh.
``People are using MP3s, but they're not throwing their CD players into the trash,'' Rumer said. ``Sales of recordable CDs and DVDs are growing at 20-30 percent, but the overall optical media market should finish the year flat to up 5 percent.''
``Part of the challenge has been that there's been no killer content - no big media hits where you need two copies. New disc technology also is emerging in Blu-ray, but it's not clear which format will prevail, so people are holding off on buying,'' Rumer said.
The market also continues to grapple with global overcapacity, according to RTI's Smith.
``Polycarbonate should be good at 6-7 percent globally because of growth in the Far East,'' Smith said. ``The issue is that capacity's been added at least at that rate, especially in 2005 and 2006.
``We're looking at a supply/demand imbalance that favors the buyer. Pricing was down 5-8 percent in 2005 and was flat in 2006, but could be down farther in 2007.''
PC buyers contacted by Plastics News reported a total drop of about 10 cents per pound in late 2005 and early 2006.
Further penetration into the auto market could provide opportunities for PC, according to Rumer, even if overall North American auto builds are expected to be down in 2007.
``We're looking for more pounds [of PC] per car,'' he said. ``Headlamp assemblies are getting bigger, and PC/ABS blends are getting into instrument panels and interior components because of their higher flow rates.''
Rumer added that the PC sheet market is growing at ``normal rates'' of 3-4 percent, but could pick up sales in hurricane protection.
``In those situations, people are asking more from windows than transparency,'' he said.
Smith agreed that PC sheet and film ``is still a good business,'' adding that the telecommunications sector could provide uses for PC in electrical and electronic chips and chip carriers, especially in the Far East.
In 2007, Rumer said he expects global growth of 5-6 percent, with capacity utilization in the high 80s.
ABS
The North American ABS market enjoyed a bit of a comeback in the first seven months of 2006, and producers are optimistic that the trend will continue into next year.
Regional sales were up more than 5 percent in that period vs. 2005, according to APC.
``The automotive market is starting to turn down, but [there is ABS] growth in consumer areas like appliances and small appliances like vacuum cleaners and kitchen electronics,'' said Charles Crew, ABS business director at GE Plastics of Pittsfield, Mass.
``Likewise, the construction market also is turning down with interest rates going up, but we're seeing new applications in remodeling such as window profiles, garage doors and siding. We're looking for more penetration per house.''
Crew added that ABS and acrylic styrene acrylonitrile are making inroads into construction because of their good temperature performance vs. PVC.
And although ABS continues to battle benzene as it inflates styrene monomer prices, Crew said he believes regional demand growth could hit 5 percent again in 2007.
``The capacity and physical assets are there,'' he said. ``It's all in how you use them.''
TPEs
Even with a downbeat automotive market, TPE markets should prosper in 2007.
``Globally, TPEs should have better than GDP growth rates as you see more and more of these products used in low-cost regions,'' said Howard Blum, an analyst with Kline & Co. of Little Falls, N.J. ``TPEs are performing more efficiently than thermoset rubber and now recycling is more of an issue because of cost savings and energy savings.
``There's going to be some downturn [for TPEs] in automotive because of lower builds, but these products can still gain volume in other areas.
``Auto is still the largest end market but isn't as big a portion as it was even five years ago,'' Blum said.
Other potential TPE markets for 2007, according to Blum, are weatherstrips for residential windows and doors and applications in consumer goods and computer accessories where manufacturers want extra color or tactile feel in a product.
Thermoplastic polyurethane maker Noveon Inc. is showing its faith in the market's future by expanding capacity by one-third at its plant in Avon Lake, Ohio. Officials with Brecksville, Ohio-based Noveon cited wire and cable, hose and tubing, and film and sheet as markets driving TPU growth.
Noveon officials added that TPU's ease of processability and its use in extrusion are helping the material penetrate new markets.
* * *
A year after the storms, prices on higher ground
* Aug. 29, 2005
Katrina hits New Orleans after first making landfall Aug. 24 at Florida's Gulf Coast
* Sept. 24, 2005
Rita first comes ashore at Texas-Louisiana coast