Prices for commodity resins polyethylene, polystyrene and PVC are heating up as spring approaches.
Since March 1, prices for all grades of PE are up an average of 3 cents per pound, while PS prices have jumped 4 cents and PVC has surged an average of 3 cents, according to buyers contacted recently by Plastics News.
A strong PE export market helped PE makers make up for soft domestic demand and push through the second half of a 6 cent-per-pound increase originally announced for Jan. 1.
The most recent 3 cent increase ``was somewhat surprising, but export demand was strong enough to keep domestic supply tight,'' said a PE buyer based in the Midwest.
``Exports have been strong, and the [PE] suppliers did a good job of reducing their inventories,'' said Mike Burns, a managing partner with Resin Technology Inc., a resin-buying consultancy based in Fort Worth, Texas.
``The film companies are picking up a little bit, but overall demand is still very soft,'' Burns said. He pointed out that North American PE growth in February was less than 1 percent above demand in the same month in 2006.
PE makers currently are seeking increases of 4 cents per pound, effective April 1. Increases of 7 cents per pound have been announced for PE grades based on hexene feedstock, as a result of recent hexene shortages. Market watchers said the shortages were caused when North American capacities for the material were closed before foreign sources were able to supply production.
In PS, higher prices for benzene feedstock compensated for light demand, driving up prices. Lack of profitability continues to plague PS makers, even though PS remains the material of choice in many food-service applications. Competition between PS, HDPE and polypropylene has intensified as PS prices have soared in the last 24 months, market insiders said.
These conditions led to the recent deal between Nova Chemicals Corp. of Pittsburgh and Lyndhurst, England-based conglomerate Ineos Group, under which the two firms will combine their North American PS and styrene monomer businesses. The deal creates North America's largest PS maker.
Longer-term, industry analyst Vince Sinclair of Chemical Market Associates Inc. in Houston expects global PS demand to average growth of just under 2 percent annually between 2006 and 2011.
Meanwhile in PVC, prices moved up as the construction sector began to build inventory, even amid dire predictions for that industry in 2007. Construction accounts for more than 60 percent of U.S./Canadian PVC sales.
``Seeing the whole increase go through was a bit of a surprise,'' a Texas-based PVC buyer said. ``But our suppliers are telling us that the PVC side of their business is still losing money because of lower volumes and lower operating rates.''
In February, sales of new single-family homes in the U.S. fell almost 4 percent from the previous month, according to the Commerce Department. The February home-building level was the lowest in almost seven years. New-home sales for the month fell 27 percent in the Northeast, 20 percent in the Midwest and 7 percent in the South.
``It's obvious that the [housing] weakness is more fundamental, and this apparently can be traced to the mortgage market,'' National Association of Homebuilders chief economist David Seiders said in a recent news release. Subprime mortgage lenders have been bombarded by an increasing number of loan defaults in recent months.
But old buying habits are hard to break in the PVC market.
``Demand is picking up, since everybody's getting a better price for their [PVC-based] products than they were 30 days ago,'' the Texas buyer said. ``It's looking more like a typical spring.''
PVC makers now are working on increases of 3 cents per pound set for April 1.