North American prices for polyethylene and PVC are heading in different directions right now, but like many conditions in the resin world, that could change.
Since Sept. 1, average per-pound selling prices for high, low and linear low density PE have dropped an average of 5 cents per pound, according to a number of buyers contacted recently by Plastics News. The change essentially gave back 5 cent gains that had occurred in August.
Lackluster demand and fading feedstock costs allowed the price to slip, buyers said. Outages affecting 10-15 percent of North American ethylene production weren't enough to hold the line on pricing.
``Demand and the underlying cost of ethylene just fell away,'' a New Jersey-based PE buyer said. ``Feedstock costs were going down at an even faster rate than what we're seeing at the gas pump.''
Those gasoline prices are affected by crude oil, but it's natural gas that's used to make about 70 percent of North American PE. And natural gas markets have been soft lately, with cash prices dropping from around $7.50 per million Btu in early August to less than $4 in early October.
Prices rebounded slightly to about $5.10 on Oct. 9. Natural gas futures for November were around $6.50 as of Oct. 10.
Natural gas prices so far are lower than many market watchers had predicted. On Oct. 9, the federal Energy Information Administration said expectations of another warm winter could drive down residential natural gas prices more than 15 percent, particularly in the absence of an unpredicted market driver such as last year's hurricanes.
EIA also is reporting that supplies of natural gas in storage in the lower 48 states are about 11 percent higher now than they were a year ago.
The net effect for North American PE is that buyers are expecting additional price reductions through the end of the year, especially with demand softening for finished products made of PE.
Through July, sales of HDPE were up 3 percent, while LDPE sales were up 1 percent and LLDPE sales had climbed 4 percent, according to the American Plastics Council in Arlington, Va.
First-half sales volume in pounds at Dow Chemical Co.'s basic plastics unit - including PE, polypropylene and polystyrene - was up 2 percent. Midland, Mich.-based Dow ranks as one of the region's largest PE makers.
In North American PVC, resin makers won a hard-fought 2 cent per-pound price increase in August and are battling for another 2 cents in September. The August move is in place, but the fate of the September move remains up in the air, according to several buyers contacted.
The contraction of the housing market, plus lower feedstock costs, could make the going difficult for PVC makers through the end of the year, buyers said.
``When you look at it, [resin makers'] input costs really have declined recently,'' a Midwestern PVC buyer said. ``With the cost structure they have now, they don't need to have as much [PVC] cost to meet their profit targets.''
Some PVC market watchers point out that next year's anticipated slowdown in North American residential construction already has been factored into the plans of the dominant PVC pipe market. Others contend that large municipal infrastructure projects - including replacement of sewer and water systems in aging East Coast and Midwest cities - can spur PVC use in the absence of new housing.
But it's hard to discount the absence of new subdivisions, which had been springing up across North America like dandelions in an untended garden.
``We're running off backlog [inventory] right now,'' a second Midwestern PVC buyer said. ``People aren't buying houses and they're not buying pipe.''
Through July, North American PVC sales essentially were flat when compared to 2005, according to APC, but sales into the rigid pipe and tubing market were up almost 3 percent.
Rigid pipe and tubing accounted for 48 percent of regional PVC demand in that period.
Second-quarter sales volume in pounds at Georgia Gulf Corp.'s chlorovinyls unit - including PVC - was up 9 percent vs. the same quarter in 2005. Atlanta-based Georgia Gulf ranks fourth in North American PVC capacity.