North American prices for PVC and polypropylene resin have come charging out of the gate in 2014. Find out why in this edition of Material Insights.
Regional prices for suspension PVC are up an average of 3 cents per pound since Jan. 1, while prices for polypropylene in the region are up an average of 5 cents.
PVC prices were affected by stronger demand, as the construction season looms on the horizon. U.S. housing starts are expected to surpass 1 million in 2014 for the first time in five years. The building and construction market accounts for more than half of PVC sales in the region.
North American PVC supplies also were affected by an outage at a vinyl chloride monomer feedstock plant operated by Axiall in Lake Charles, La. Equipment at the plant was damaged during a Dec. 22 fire. The plant has been operating under force majeure conditions.
US/Canadian PVC sales were flat in 2013 at just under 15.3 billion pounds, according to the American Chemistry Council. A domestic sales gain of more than 4 percent was wiped out by a 7.5 percent drop in export sales.
For polypropylene, the 5-cent January increase came on the heels of a 4-cent December hike. Resin prices again followed the path of propylene feedstock, but this time resin suppliers were able to improve their margins by adding an extra cent to a 4-cent-per-pound monomer hike.
North American polypropylene sales fell almost 1 percent in 2013 to just under 16.4 billion pounds. Domestic sales grew almost 1 percent, sales to the export market tumbled 35 percent. High prices made polypropylene from North America less competitive in foreign markets.
Last week also saw a big deal take shape in the global styrenic block copolymer market. Global SBC leader Kraton Performance Polymers agreed to merge with the SBC business of LCY Chemical of Taiwan to create a materials firm with annual sales of more than $2 billion.
Kraton will remain a public company based in Houston, with ownership split evenly between shareholders of each company. Kevin Fogarty will remain as Kraton's CEO.
Fogarty said that the transaction will position Kraton for profitable growth for years to come and will create value for the firm's shareholders.
Market analyst Robert Eller said the deal should be beneficial to both firms. He said that Kraton in particular will benefit from LCY's stronger presence in Asia.
The week also saw a strong earnings report from Dow Chemical. Officials with Midland, Mich.-based Dow also defended themselves against criticism from unhappy shareholder Third Point LLC.
Dow's 2013 sales were up less than 1 percent to just under $57.1 billion, but profit increased more than four times to $4.8 billion. Some of this improvement came from Dow winning cash settlement of almost $2.5 billion over a failed business deal with Petrochemical Industries Co. of Kuwait.
New York-based investor Third Point had criticized Dow earlier in January for what it called a poor operational track record. But Dow Chairman and CEO Andrew Liveris defended his company's strategy, saying that Dow in recent years has divested $10 billion in commodity businesses.
According to Liveris, Dow has transitioned to being a producer of agricultural and high-end plastic products, in order to re-shape and position the company for long-term earnings growth.