Feedstock pressure continues to exert its will in the resin market, driving up prices for PVC, polystyrene and polycarbonate in the past 60 days.
But a subsequent break in oil pricing has given processors hope that they've seen the last of the price hikes for the time being.
Increases of 4 cents per pound are being shown on this week's Plastics News resin pricing chart for both suspension PVC and solid PS.
The PS move took place in August, while the PVC hike took effect in July. Prices for PC also are showing an average increase of 15 cents per pound that's taken hold since July 1.
Also this week, PN is revising prices upward on all grades of ABS and polyester — including polybutylene terephthalate — based on market increases that have occurred in the past 12 months.
The PVC upswing has been driven by higher ethylene prices, which peaked in July and since have come down, especially on the spot market.
The increase also comes amid hard times for many PVC processors, especially those in the construction field. According to the National Association of Home Builders in Washington, U.S. single-family housing starts fell to an annualized rate of 641,000 in July — their lowest level since January 1991.
One Midwestern PVC buyer said his processing firm has been operating at less than 75 percent of capacity for most of the year. He is mulling long-term changes to the business as a result.
``There's not a whole lot else we can do at this point,'' he said. ``We're not buying as much resin as we were a year ago because our sales are down so much.''
PVC-related sales at Georgia Gulf Corp. of Atlanta were up almost 7 percent in the first half of 2008, but the unit's operating revenue fell 9 percent to less than $37 million.
At Houston-based Westlake Chemicals Corp., PVC-related sales — including pipe — were up 18 percent, but operating income plummeted 47 percent to just over $15 million. Market watchers said the sales gains posted by those firms resulted from the pass-through of higher raw material and freight costs, rather than from the sale of more resin.
U.S./Canadian PVC demand was down 5 percent in the first five months of 2008, according to the American Chemistry Council in Arlington, Va. That mark would have been much worse if not for a surge of almost 80 percent in exports from the region. Domestic sales sank 13 percent during that five-month period, weighed down by a dip of almost 21 percent in the massive rigid pipe and tubing end market.
PVC buyers are hopeful that the recent break in oil pricing — one that's seen crude futures drop from $147 per barrel in mid-July to less than $116 in late trading Aug. 28 — will provide some relief on PVC prices as well. The potential impact of Hurricane Gustav, however, could push oil in the opposite direction, and as a result keep PVC prices high for another month or so.
In solid PS, prices rose again as contracts for benzene feedstock climbed from $4.20 per gallon in July to an all-time high of $4.45 in August. Market analyst Greg Smith of Resin Technology Inc. in Fort Worth, Texas, said that climb was tied in to high oil prices coupled with production problems at some benzene facilities. Tight supplies of butadiene feedstock provided added pressure for production of high-impact PS.
At Ineos Nova LLC — one of North America's largest PS makers — sales of solid PS and styrene monomer feedstock were down 3 percent to $1.1 billion in the first half of the year. The joint venture's operating income also tumbled all the way down to $1 million, after being at $35 million in the first half of 2007. Channahon, Ill.-based Ineos Nova's first-half sales volume in pounds for solid and expanded PS fell almost 6 percent to 835 million pounds.
The high benzene market makes price drops in PS less likely than in other commodity resins in spite of soft demand, market sources said. U.S./Canadian PS sales — including EPS — fell 4.5 percent in the first five months of 2008, even with exports from the region up 7.5 percent. The only domestic PS market that remained in positive territory was consumer and institutional products, where five-month sales were up almost 3 percent.
Polycarbonate prices jumped even as demand remained soft in automotive, construction and optical media markets, sources said. Once again, benzene was among the culprits in the rise. North American PC production is expected to remain in the range of 1.7 billion to 1.8 billion pounds in 2008 — roughly flat with levels from 2006 and 2007.
Corrections to prices for ABS also point back to benzene — used to make styrene monomer — as well as butadiene. The polyester corrections are tied to market rates for feedstocks including paraxylene and purified terephthalic acid.