North American customers aren't buying a heck of a lot, but that hasn't stopped recent price increases from taking hold in polyethylene, polypropylene and PVC.
Prices on all grades of PE have jumped an average of 5 cents per pound since July 1, according to several buyers contacted recently by Plastics News. PE prices in the region now are up an average of 15 cents per pound so far in 2007.
``It's been really frustrating,'' a Florida-based PE buyer said of the increases. ``At some point, it's going to be all the market can bear.''
A PE buyer in the Midwest said that as his company has attempted to pass along the increases to his own customers, those customers have cut back on their orders or tried to find products made of nonplastic materials.
Customers ``are going back to alternate materials or they're using less [plastic] material in their product designs,'' the buyer said.
Through April, U.S./Canadian sales of low density and linear low density PE each were down less than 1 percent, and regional high density PE sales were up less than 3 percent, according to the American Chemistry Council in Arlington, Va.
But U.S./Canadian export sales were through the roof, with exports of LDPE and LLDPE each up more than 20 percent and exports of HDPE climbing almost 70 percent.
``It's a strong export market and ethylene [feedstock] prices are strong globally,'' said Mike Burns, an industry analyst with Resin Technologies Inc., a resin-buying consultancy based in Fort Worth, Texas.
Resin makers also are reporting operating rates of above 90 percent and low inventories at their plants. Burns said the low inventory claims are backed up by RTI research showing a drop from seven-year inventory averages at the producer level.
PE leader Dow Chemical Co. of Midland, Mich., reported recently that second-quarter global sales in its basic plastics unit, which includes PE, PP and polystyrene, were up 6 percent vs. the previous quarter to $3.2 billion. Prices were up 7 percent even as sales volume in pounds fell 1 percent in the same comparison. About 75 percent of the unit's sales come from PE.
At Nova Chemicals Corp. of Pittsburgh, second-quarter PE sales were up 12 percent vs. the previous quarter to $475 million. Nova's PE sales volume in pounds was up 4 percent to 830 million pounds in the same comparison. Petrochemicals firm Lyondell Chemical Co. of Houston saw second-quarter PE volume in pounds stay flat at about 1.5 billion pounds, but quarterly sales at its Equistar Chemicals LP unit - including those for PE - were up about 25 percent to $3.5 billion.
North American PP prices eked out an average gain of 1 cent per pound in June, even as producers were seeking gains of 5-9 cents. Regional PP prices now are up an average of 9 cents per pound for the year.
PP capacity use in the region remained above 90 percent, mainly as the result of a red-hot export market, where sales through April were up 104 percent. Sales into North America were up about 3 percent.
``It's all being swept along by exports,'' a Midwest-based PP buyer said. ``We're not buying a lot more [PP] than we were a year ago.''
Market leader Basell Polyolefins also recently announced that it would stop PP production in Sarnia, Ontario, by mid-2008, removing about 220 million pounds of capacity from the market.
Elsewhere, Basell joint venture Indelpro SA is building a 770 million pound-per-year PP plant in Altamíra, Mexico, that's set to open early next year. Basell also plans to restart an idled PP line in Bayport, Texas, next year. That line has annual capacity of almost 500 million pounds.
In the first quarter of 2007, Basell posted sales of about 2.8 billion euros ($3.8 billion) in PP and related products. That total is about 8 percent higher than its sales in the year-ago period.
Some PP makers now have announced increases of 3 cents per pound for Aug. 1, but several buyers said they expect regional pricing to soften in the late summer and early fall.
PVC still climbing
In PVC, North American prices have gained an average of 4 cents per pound since April 1, but the market appears split on the fate of another 2 cent move that was set for June 1. After seeing 2 cents in April and 2 in May, buyers are reporting prices as flat or up 1 or 2 cents in June.
The April and May increases are being shown on this week's Plastics News resin pricing chart, but no decision has been reached on the June move.
As in PE and PP, recent PVC increases do not appear to be the result of strong domestic demand. Residential construction is on the wane in the region, causing drops of 25 percent for PVC sales into siding and extruded windows and doors in the first four months of the year. Sales into rigid pipe and tubing were up 3 percent, but buyers said the pipe market is far from robust as well.
The export market is another story, however, with sales up almost 30 percent during the four-month period.
``Housing isn't good, and we're not seeing as much underground utility work,'' a Texas-based PVC buyer said. ``But we're seeing some construction work in strip malls and commercial projects and telephone industry work is picking up.''
Market analyst Steve Brien, with Chemical Market Associates Inc. in Houston, said PVC makers face issues because of higher prices for ethylene feedstock and because not all production in the region is fully integrated.
Regional PVC operating rates currently are just above 90 percent, but those rates could fall in 2008, when about 1.5 billion pounds of new capacity is set to become available from Shintech Inc., Georgia Gulf Corp. and Formosa Plastics Corp. USA.