Slowing PVC demand didn't stop resin prices from climbing an average of 2 cents per pound in October - and producers and buyers still are squabbling about another 4 cent hike announced for November.
Meanwhile, the PET bottle resin market is taking a breather, after hammering through a total of 7 cents per pound in price hikes during November and December.
The 2 cent PVC move took hold even as U.S./Canadian sales for 2007 were down almost 2 percent through November, according to the American Chemistry Council in Arlington, Va. Within the region, sales were down 5 percent as residential housing continued to struggle. Export growth of 40 percent - a result of the weak U.S. dollar - softened the overall blow for PVC makers.
Market watchers said the mere fact that a price increase still is being contested 2½ months after its enforcement date is an indicator of the tough times the market is facing. PVC makers are pointing to higher costs for raw materials crude oil and natural gas, while buyers and processors are trying to use slow business conditions and reduced need for resin as a means to limit the November increase to 2 or 3 cents.
``There's no demand - I mean, none,'' a Midwest-based PVC buyer said. ``Pipe makers should be running at 75-80 percent of capacity right now and a lot of them are running at less than half.
``Distributors aren't buying either. And resin makers are just producing the material [in North America] and shipping it elsewhere.''
Industry consultant Steve Brien said there's currently ``not a lot of optimism'' in the North American PVC field.
``The market is long, demand isn't great and margins are fairly low,'' said Brien, who is with Chemical Market Associates Inc. in Houston. ``There's hope for pickup in demand in the spring - when Shintech [Inc.] starts up its new capacity - but a lot of material could still be exported.''
Through November, one of the few bright spots for PVC was in calendered film and sheet for packaging, where sales were up 30 percent vs. the same period in 2006, according to ACC.
Atlanta-based Georgia Gulf Corp., which ranks as North America's third-largest PVC maker, also continues to struggle. Poor financial results and challenges in integrating Royal Group Technologies Ltd. - the Canadian construction products firm that Georgia Gulf bought for $1.6 billion in 2006 - have driven Georgia Gulf's per-share stock price down from $20 in early August to about $4.20 in early trading Jan. 17.
Georgia Gulf officials also have said the firm is in danger of defaulting on debt covenants. In the first nine months of 2007, the firm lost almost $39 million as its PVC-related sales fell 20 percent.
PET makers were able to win price increases of 4 cents in November and 3 cents in December, largely as a result of a shortage of monoethylene glycol feedstock. The shortage resulted from an outage of production in Saudi Arabia, which had a ripple effect on the global market, according to Edgar Acosta, an industry analyst with DeWitt & Co. in Houston.
PET makers now are working on increases of 3 cents announced for Jan. 1 and another 3 cents for Feb. 1. In 2008, a pair of major expansion projects will impact the PET market in North America. Eastman Chemical Co. plans to boost capacity by almost 400 million pounds in Columbia, S.C., and Indorama Polymers plc is building a 950 million-pound-capacity plant in Decatur, Ala.
Market watchers also are keeping an eye on the fate of Wellman Inc. of Fort Mill, S.C. Wellman, which is the fourth-largest PET maker in North America, was delisted from the New York Stock exchange Dec. 10, after its per-share stock price closed at less than $1 for 30 consecutive trading days.
Wellman, which has struggled with high feedstock costs and shrinking margins, lost $66 million in the first nine months of 2007. The company has long-term debt of nearly $600 million.