Commodity resin demand has swooned early in the fourth quarter, taking average per-pound selling prices for polyethylene, polypropylene and PVC down with it.
Since Oct. 1, PE and PP prices each have slipped an average of 4 cents per pound. PVC prices have lost an average of 2 cents in that same period.
``Demand is off and the resin companies' cost basis [for higher prices] is off,'' a Texas-based PE buyer said. ``The year-end buying market is over and people are already looking past Christmas.''
The 4 cent PE drop - affecting all grades of high, low and linear low density PE - comes after a 5 cent dip in September. Several buyers contacted by Plastics News said they expect additional decreases before the end of the year.
Through August, U.S./Canadian sales of LLDPE were up almost 3 percent vs. last year, and regional sales of HDPE were up almost 2 percent, according to the American Plastics Council in Arlington, Va. But sales of LDPE were roughly flat, owing to a 5 percent drop in the extrusion coating end market.
Cash prices for PE feedstock natural gas climbed above $7 per million Btu in early November after being around $4 a month earlier. But buyers said PE makers had built adequate margin through price increases in late 2005 and the first half of 2006 to remain profitable even after lowering prices.
At the Equistar unit of Houston-based Lyondell Chemical Co., sales of ethylene and derivative products - including HDPE - were up 15 percent to almost $10.2 billion in the first nine months of 2006. But the firm's quarterly PE sales volume in pounds fell more than 100 million pounds between the second and third quarters of 2006.
The PP drop of 4 cents comes amid a slowing market for automotive products and major consumer goods like appliances and furniture. Total U.S./Canadian PP demand through August was virtually flat with the year-ago period, according to APC.
Regional PP prices had climbed an average of 9 cents per pound since May 1 before the October drop, which has buyers expecting more market softness in November.
The late-year drop in PVC demand has been extreme as well.
``Things started to slow down in September, and October was very slow,'' a Midwest-based PVC buyer said. ``Our customers aren't buying our products, so we're not buying resin. Buyers are looking at the economy and saying, `Sell our inventory off.' ''
U.S./Canadian PVC demand through August was down almost 1 percent, according to APC, even with the dominant rigid pipe and tubing end market showing sales growth of more than 2 percent. Although the residential housing market is slowing in many parts of the U.S., PVC makers and processors are hopeful that PVC demand from infrastructure projects and from retail development and office space will pick up the slack.
Sales of PVC and related products at Atlanta-based Georgia Gulf Corp. were up 13 percent to more than $1.3 billion in the first nine months of 2006. The firm estimated that operating rates in the North American PVC market reached 95 percent in the third quarter.