Buyers of polyethylene, polypropylene and PVC stayed on the sidelines in November, sending prices tumbling once again.
Average North American selling prices for PE dipped 6 cents per pound for the month, while PP prices took a 7 cent tumble and PVC prices slipped an average of 2 cents, according to buyers contacted recently by Plastics News.
North American PE makers had been exporting a good deal of material out of the region, but recent shipping problems at Houston ports have caused material to back up into the domestic market, according to Frances Moore-Jones, a market analyst with Townsend Polymer Services & Information in Houston. Moore-Jones added that drops in pricing for ethylene feedstock also contributed to soft pricing in the recent PE market.
Through September, U.S./Canadian sales of high and linear low density PE were up less than 2 percent vs. their 2006 levels, while LDPE sales in the region were down about 1 percent, according to the American Plastics Council in Arlington, Va.
The top gainer for HDPE has been the pipe and conduit market, which consumed 17 percent more material in the first nine months of 2006 than it did in the year-ago period. Through September, that market accounted for about 15 percent of domestic HDPE demand, according to APC. The LLDPE market was paced by trash bags and can liners, where demand was up almost 3 percent.
Houston's Chemical Market Associates Inc. consulting firm now estimates that North American PE operating rates will be 81-86 percent in the fourth quarter. That's down from third-quarter levels of 90-94 percent.
Regional PP sales also were down about 1 percent in the nine-month period, according to APC. The drop came in spite of a gain of almost 3 percent in injection molded caps and closures - a segment that made up about 7 percent of the domestic market.
CMAI estimates fourth-quarter operating rates for PP in North America at 88 percent, down from 91 percent in the third quarter.
PVC demand declined even as its dominant rigid pipe and tubing segment consumed 2 percent more material in the nine-month period. The domestic PVC market weathered sizable demand drops in the siding and calendaring markets.
``There was little demand in October and no demand at all in November,'' a Midwest-based PVC buyer said.
Another PVC buyer based in the Southeast said the U.S. housing market - which provides 60-70 percent of PVC demand - might not bounce back until mid-2007 because of an overstock of new homes available.
Decreased activity in the PVC market also has led PVC maker Georgia Gulf Corp. temporarily to stop production of PVC feedstock vinyl chloride monomer at its plant in Lake Charles, La., industry sources said. The site has annual capacity of 850 million pounds of VCM. Officials with Atlanta-based Georgia Gulf could not be reached for comment.
CMAI's fourth-quarter operating rate estimate for North American PVC is 76 percent, a steep drop from a third-quarter level of 94 percent.
Buyers of PE and PP are expecting further price drops in December, although at lower amounts than what they saw in November. PE makers have a total of 13 cents in price increases already announced for early 2007, while PP makers have a 5 cent increase attempt on the table for Jan. 1.
``December might still be slow,'' Townsend's Moore-Jones said. ``But there's nothing that would make you think the soft demand trend would continue into 2007.''
Several buyers of PE, PP and PVC said they expect soft demand conditions to continue in December. Kevin McCarthy, a stock analyst with Banc of America Securities LLC in New York, agreed, saying in a Dec. 12 research note that petrochemical prices and margins could drop in December because of U.S. economic deceleration, seasonal softness and buyers' reluctance to restock.
As a result of lower volumes and margins, McCarthy has lowered Banc of America's earnings estimates and per-share price targets for petrochemicals makers Dow Chemical Co., Lyondell Chemical Co., Nova Chemicals Corp. and Westlake Chemical Corp.
In total, PE prices now have dropped an average of 15 cents - or 18 percent - since Oct. 1, based on the Plastics News resin pricing chart. PP prices have dipped 11 cents (13 percent) and PVC prices are down 4 cents (6 percent) for the same period.