Your Business Pricing Update - January 2009

With demand for all commodity resins exceedingly weak, and feedstock prices fallen through the floor, there appears to be nothing to stop resin tabs from shrinking further in 2009. That hasn’t stopped polyolefins producers from making an attempt to raise prices in the teeth of this “perfect storm.”

Putting it all in perspective, Bill Bowie, president of resin purchasing consultants Resin Technology, Inc. (RTI) in Fort Worth, Texas, says, “Barring some major global event, we may see a more stable resin pricing environment globally as economies start to rebuild themselves. Our advice to plastics processors during this time is to take a careful look at your business to find opportunities for change that will allow you to weather this downturn. This includes identifying opportunities to use lower-cost resins. I also think processors should broaden their opportunities by dealing with more suppliers.”

Bowie notes that there are some real questions about which resin suppliers will remain standing. By dealing with at least two to three suppliers, he says, you won’t be left in the lurch if one of your suppliers quits the market, through divesting a resin business or otherwise.

For the future, he advises, “Always look out for the key indicators, like prices and availability of chemical feedstocks to get a better feel for where things are heading. I think an early glimmer of an upturn is very likely to come from China, when we see their GDP rising and factories humming again.”

 

PE: TIME FOR A HIKE?

Overall, polyethylene prices are projected to be 25% lower in 2009 vs. 2008. Those prices, which climbed 18¢/lb in 2008 (and a total of 42¢ since 2007), had declined 33¢ through November. Another drop of as much as 10¢ was possible by the end of December. Declaring that resin tabs had “bottomed out,” PE suppliers dared to issue a price increase of 7¢/lb for Jan. 1. That view was not supported by the direction of the London Metal Exchange (LME) short-term North American futures contract in blown-film butene LLDPE. It hit 19.7¢/lb for January, a steep drop from December’s 58.7¢.

Contributing factors: Industry sources see potential for “relative stability” in prices during most of the first quarter, primarily because feedstock prices are projected to be stable as well. “Pay attention to what spot ethylene and precursor ethane prices are doing,” advises Mike Burns, RTI’s global business director for PE. Ethylene contract prices dropped to 38¢/lb in November, 25¢ lower than in September. December contracts were expected to drop another 8¢ to 10¢. Meanwhile, spot prices were at a low of 15¢ to 16¢/lb.

The consensus of industry analysts is that the new PE price initiative is not likely to take hold until later in the first quarter. “You can expect to see ethylene spot prices come up to about 20¢/lb or more, at which point ethylene contract prices will move up some. PE resin suppliers may then be able to implement 3¢ to 5¢ of their 7¢/lb increase,” says RTI’s Burns.

Meanwhile, following a 4% to 6% drop in PE demand in 2007, PE demand in 2008 was down by the same amount for high-demand products like film resins, and as much as 15% lower for other types, such as injection molding grades for containers. While no one is willing to cite a number for how demand will fare this year, there is an expectation of further declines. Resin suppliers are likely to implement more production cutbacks.

Sums up RTI’s Burns, “In 2008, 10 billion lb, or 25%, of North American PE production was exported. In 2009, the PE export market may not exist if there is no change in the global economy. Domestic suppliers would need to reduce production by 10 billion lb before cutbacks would impact resin pricing.”

 

PP PRICES PLUNGE

Polypropylene prices were expected to end 2008 68¢ to 70¢/lb below their high point for the year. From their peak in July-August, PP tabs declined by 57¢ through November, which left prices 32¢ below their level at the start of the year. At least 10¢ more was expected to come off in December. Claiming prices had hit bottom, suppliers announced hikes of 5¢ to 6¢/lb for Jan.1. However, the LME’s North American short-term futures contract for January in g-p injection-grade homopolymer plunged to 29.8¢/lb from December’s 37¢.

Contributing factors: Domestic PP demand was down 7% by the end of the third quarter and was expected to be down 10% to 12% by the end of 2008. Scott Newell, RTI’s director of client services for PP expects to see more shutdowns of PP capacity, some permanent and some temporary.

Propylene monomer is in oversupply due to slack demand. By the end of 2008, monomer price was down 65¢/lb from the peak in mid-summer. December contract prices were expected to come down at least another 10¢ to about 20¢/lb. “The last time we saw propylene monomer and PP resin prices this low was in the summer of 2003,” notes Newell. He expected that monomer and PP resin prices would hit bottom in December and would stabilize this month.

As for the announced PP price hike, Newell says, “We expect to see at least a portion of that increase take hold in the first quarter. The big question is: where is the real demand? This is a tough call without knowing where our economy and global economics in general will go. What will happen to crude oil prices? Will they go down to $25/barrel or up to $65/barrel?”

 

PVC IN ’09: FLAT TO DOWN

PVC prices were expected to fall 6¢ to 7¢/lb in December. Early last month, Formosa announced a 5¢/lb increase for Jan. 1, but at mid-month the move wasn’t supported by other producers.

Contributing factors: Demand in December was extremely weak. Overall PVC demand for 2008 was expected to end 9% to 9.5% below the year before. Optimistic resin producers say PVC demand in 2009 will be flat or down at most 1% to 2%. Their “worst-case” scenario is a 5% to 6% drop in demand this year because of the downturn in construction. Housing starts are expected to stay weak—below 600,000 units, vs. over 1 million in a normal economy. And any recovery in the housing market will have to work through a large inventory of unsold homes before new construction will resume.

Resin suppliers’ operating rates are believed to have been below 60% for the fourth quarter. In mid October, Shintech started up 650 million lb of its new 1.3-billion-lb plant in Iberville, La. At the same time, Shintech took an early scheduled maintenance shutdown at its 1.1-billion-lb plant in Addis, La., temporarily avoiding further excess resin capacity. Some older PVC plants are expected to close this year.

 

PS KEEPS DROPPING

Polystyrene resin producers and analysts expected prices to fall 12.5¢/lb in December after a plunge of 20¢ in November. PS prices are expected to be flat or lower in 2009, especially in the seasonally weak first and second quarters.

Contributing factors: The price of benzene feedstock continued to fall in December. Contract benzene was $1.07/gal, down from $1.60 in November. Spot prices dipped as low as 80¢, which is below cost. Benzene is expected to stay long throughout 2009, as new environmental regulations gradually reduce the amount of aromatics that can be put into gasoline, increasing the amount of toluene that will go into benzene instead.

Demand for PS was severely weak in November and December, so total demand for 2008 could end up as much as 9% to 10% below 2007. Resin operating rates were believed to be in the 70% to 74% range last month.

 

PET PRICES PLUMMET

PET prices plunged at least 15¢/lb between September and November, following a drop of 5¢ in August, and were expected to slip a bit lower last month. PET prices are expected to be flat this month, though a price increase could emerge late in this first quarter. Prices typically go up in the second quarter, when demand normally surges.

Contributing factors: PET tabs have followed feedstock prices downward nearly penny for penny. Paraxylene and ethylene glycol were both down 10¢ to 12¢/lb through November and were expected to fall a bit lower in December—erasing any profit margin for PET suppliers.

According to Michael Dewsbury, RTI’s global business director for PET, demand for PET in 2008 was down from the previous year, but he is “relatively optimistic” that 2009 will be flat or better. “The key question is: when will the economy improve? In the past, we thought that the soda and water bottle markets were recession-proof. This does not seem to be the case now, as consumers are cutting back.”

Supply/demand balance signals a 10% improvement in resin capacity utilization rates for 2009. Permanent shutdowns of PET resin capacity by Invista and Wellman already equal the 800 to 900 million lb of new capacity that will be brought on stream by Indorama’s AlphaPet subsidiary in Decatur, Ala., at the end of this year. This new capacity, added to the 500 million lb at StarPet’s existing site in North Carolina, would make Indorama the leading PET supplier in North America.

 

Acrylic Resin Made from Renewable Raw Materials

Acrylic has joined the growing ranks of plastics being made from renewable sources. New Altuglas Rnew from Altuglas International in France (U.S. office in Philadelphia), is a PMMA grade containing 20% of carbon derived directly from biomass. It has properties comparable to conventional PMMA grades produced entirely from “fossil” carbon.
(800) 523-1532 • www.altuglas.com
 

Market Prices Effective Mid-Dec A      RESIN GRADEb ¢/LB ¢/CU INc    ABS           MED IMPACT    95 - 115      359 - 434       HI IMPACT    100 - 135      378 - 510       X-HI IMPACT    110 - 150      415 - 567       HI HEAT    95 - 130      359 - 491       PIPE    95 - 105      359 - 396       SHEET    99 - 115      374 - 434       TRANSPARENT    134 - 205      506 - 774       FITTINGS    94 - 115      374 - 434       PLATING    134 - 205      506 - 774       FLAME RET    129 - 145      487 - 548       STRUCT FM    92 - 102      347 - 385       10% GLASS    134 - 145      506 - 548       30% GLASS    129 - 141      487       ABS/PC ALLOY    154 - 185      532 - 699       ABS/PVC ALLOY    139 - 144      525 - 544       ABS/NYLON ALLOY    199 - 355      752 - 1341       ACETAL           HOMOPOL    151 - 172      7.7 - 8.7       20% GLASS    171 - 235      8.7 - 11.9       COPOLYMER    144 - 160      7.3 - 8.1       25% GLASS    171 - 245      8.7 - 12.4       ACRYLIC           G-P    117      5.0       IMPACT    192      8.2       ACRYLONITRILE COPOL           EXTRUSION    101 - 116      4.0 - 4.6       INJECTION    120 - 135      4.8 - 5.4       ALKYD  65 - 74    4.9 - 5.5       CELLULOSICS           ACETATE    187      8.6       CAB    189      8.2       CAP    189      8.2       DAP (G-P)  251 - 497    16.7 - 34.7       EPOXY           G-P RESIN    116 - 126      NAd       COMPOUNDS               C/B/Te    123 - 166      9.4 - 12.9       R/C/Df    208 - 271      15.3 - 20.1       SEMICONDUCTOR               NOVOLAC    193 - 228      13.1 - 15.9       ANHYDRIDE    188 - 268      13.9 - 19.2       EVA           INJECTION    69 - 71      2.3 - 2.4       FILM EXTRU    67 - 69      2.3       EVOH  330    15       FLUORO-POLYMER           CTFE    5000 - 6000      385 - 462       ECTFE    1200 - 1680      90.7 - 120       ETFE    1205 - 1730      80.7 - 115.8       FEP    971 - 1470      74.8 - 113.2       PFA    1550 - 2520      120 - 195       PTFE    500 - 950      33.5 - 63.6       PVDF    730 - 1100      47 - 70       IONOMER           PACKAGING    127 - 166      4.3 - 6.0       INDUSTRIAL    150 - 244      5.0 - 8.3       LIQUID-CRYSTAL POLYMERS           INJECTION MIN FILLED    690 - 1035      44.2 - 72.1       GLASS FILLED    695 - 895      40 - 52       CARBON FILLED    1700 - 2000      83.2 - 138.6       UNFILLED    1000 - 1200      58 - 70       EXTRUSION UNFILLED    1200 - 2200      60.5 - 110.9       MELAMINE COMPOUND  90 - 94    5.5 - 5.6       MELAMINE/PHENOLIC COMPOUND  75 - 83    4.5 - 5.0       NYLON           TYPE 6    139 - 159      5.7 - 6.5       MIN FILLED    131 - 144      5.4 - 5.9       30% GLASS    148 - 173      6.0 - 7.0       TYPE 66    153 - 168      6.3 - 6.9       MIN FILLED    151 - 159      6.2 - 6.5       30% GLASS    142 - 192      5.8 - 7.9       TYPE 69    250 - 276      9.7 - 10.7       TYPE 6/10    286 - 313      12.4 - 13.6       TYPE 612    400      15.3       30% GLASS    309 - 311      14.7       40% GLASS    309      14.7       TYPE 46    295      12.6       TYPE 11    650 - 750      24.3 - 28       30% GLASS    NAd - NAd      NAd - NAd       40% GLASS    NAd - NAd      NAd - NAd       TYPE 12    318 - 341      12.1 - 13.0       30% GLASS    327 - 350      14.7 - 15.8       50% GLASS    299 - 340      15.6 - 17.8       TRANSPARENT AMORPHOUS    247 - 360      10.3 - 15.0       PHENOLIC MOLD COMP  75    3.8       REINFORCED GRADES    105 - 268      6.1 - 16       POLYAMIDE-IMIDEg           UNFILLED    2750      148.5       30% GLASS    2500      135       30% CARBON FIB.    3500      185       POLYARYLATE  200 - 280    8.8 - 12.3       POLYARYL SULFONE  440    21.8       POLYBUTYLENE           G-P    94 - 96      3.1       FILM    88 - 91      2.9       PIPE               COLD WATER    116 - 120      3.9 - 4.0       HOT WATER    162 - 166      5.5 - 5.6       POLYCARBONATE           INJECTION    166 - 182     7.9      20% GLASS    172 - 190     8.2      30% GLASS    173 - 217     9.3      EXTRUSION    140 - 180     7.7      BLOW MOLD    145 - 185     7.5      STRUCT FOAM    144 - 181     7.8      20% GLASS    230 - 255     11.0      FR    161 - 197     8.5      CD    130 - 195     8.4      POLYESTER (TP) PBT TYPE           UNFILLED    145 - 150      6.8 - 7.3       HI-IMP    165 - 175      7.8 - 8.3       30% GLASS, FR    195 - 215      9.2 - 10.1       STRUCT FOAM    159 - 165      NAd       PET           BOTTLE (RAILCAR)    67 - 71     3.4 - 3.6      MOD PET               30% GLASS    132 - 143      7.4       55% GLASS    148 - 155      9.8       30% GLASS FLAME RET    147 - 157      9.2       PETG COPOL    114 - 124      5.2 - 5.6       POLYESTER THERMOSET           G-P ORTHO    161 - 171      NAd       ISOPHTHALIC    185 - 200     NAd       BIS-A    220 - 240     NAd       PEEK  4400    231       30% GLASS    3300      173       POLYETHERIMIDE  641 - 646    29.3 - 29.5       30% GLASS    526 - 531      24.0 - 24.2       POLYETHERKETONE (PEK)  2950    130.1       30% GLASS    2600      153       POLYETHERSULFONE  350 - 400    17.2 - 19.7       30% GLASS    425 - 525      21 - 25.9       POLYETHYLENE (RAILCAR) LDPE           G-P MOLDING & EXTRU    53 - 55      1.8       INJECTION    55 - 57      1.8 - 1.9       LID RESIN    57 - 59      1.9       LINER    55 - 57      1.8       CLARITY    51 - 53      1.7 - 1.8       EXTRU COATG    56 - 58      1.8 - 1.9       BLOW MOLD    58 - 60      1.9       LLDPE, BUTENE BASED           G-P MOLDING    50 - 52      1.7       LME 30-DAYj    19.7     0.6      FILM    55 - 57      1.8 - 1.9       ROTOMOLD    52 - 54      1.7 - 1.8       LLDPE, HAO-BASED           G-P MOLDING    53 - 55      1.8       LID RESIN    63 - 65      2.0 - 2.1       LINER FILM    56 - 58      1.8 - 1.9       HDPE           G-P INJ MOLD    53 - 55      1.8 - 1.9       FILM    60 - 62      2.1       BLOW MOLD    61 - 63      2.1 - 2.2       HMW-HDPE           BLOW MOLDING    57 - 59      1.9 - 2.0       FILM    58 - 60      2.0       PIPE    65 - 67      2.2 - 2.3       UHMW-PE  1.22 - 1.52    4.1 - 5.1       PPE/PPO BASED RESIN           INJECTION    180      6.8       20% GLASSh    283      12.3       30% GLASSh    291      13.3       EXTRUSIONh    242      9.2       STRUCT FM    231      NAd       PPS           40% GLASS    450 - 520      27.0 - 31.2       55% GLASS/MINERAL    345 - 420      22.7 - 27.7       65% GLASS/MINERAL    270 - 315      18.9 - 22.1       POLYPROPYLENE (RAILCAR)           G-P HOMOPOL INJECTION    48 - 50      1.6       LME 30-DAYj    29.8     1.0      EXTRUSION FIBER    46 - 48      1.5 - 1.6       PROFILES    54 - 56      1.7 - 1.8       RANDOM COPOL               BLOW MOLDING    52 - 54      1.7       FILM    52 - 54      1.7       INJECTION    51 - 53      1.6 - 1.7       IMPACT COPOL               MED IMP    62 - 64      2.0 - 2.1       HI IMP    64 - 66      2.1       POLYSTYRENE (RAILCAR)           G-P CRYSTAL    61 - 67     2.3 - 2.5      HI HEAT    64 - 69     2.4 - 2.6      HIPS    71 - 77     2.7 - 2.9      SUPER HI IMP    77 - 82     2.9 - 3.1      FR    84 - 89     3.1 - 3.3      STRUCT FM (FR)    72 - 76     2.7 - 2.8      EPS           UNMODIFIED    85 - 88      NAd       MODIFIED    86 - 90      NAd       POLYSULFONE  650 - 750    29 - 33       10% GLASS 430 20.6    799 - 875      36 - 39       30% GLASS 372 20.01    699 - 775      31 - 35       POLYURETHANE (TP)           ESTER TYPE    185 - 255      8 - 11       ETHER TYPE    245 - 295      10.6 - 13       PU ISOCYANATES           POLYMERIC MDI    125 - 145      NAd       80/20 TDI    135 - 145      NAd       PVC RESIN (RAILCAR)           G-P HOMOPOL    42 - 44     NAd       PIPE    41     NAd       FILM    47 - 49     NAd       COPOLYMER FLOORING    69 - 74      NAd       DISPERSION HOMOPOLY    81 - 87      NAd       COPOLYMER    86 - 90      NAd       CPVC PIPE COMPOUND    119      NAd       PVDC           EXTRUDABLE    162      NAd       SILICONES           MOLD. COMP.    581 - 640      38.1 - 39.3       SPECIALTY GR.    891 - 3148      NAd       SILICONE/EPOXY    339 - 343      22.5 - 22.8       STYRENEACRYLIC  108 - 112    3.7 - 4.0       SAN (G-P)  80 - 88    3.0 - 3.3       STYRENE MALEIC ANHYDRIDE           G-P    110 - 115      4.2 - 4.3       HI IMP    130 - 140      4.2 - 4.5       FR    175 - 183      6.7 - 7.0       TP ELASTOMERS           OLEFINIC    70 - 76      2.4       POLYAMIDE    300 - 350      10.9 - 12.7       POLYESTER    200 - 310      8.8 - 13.6       STYRENIC    82 - 237      2.9 - 8.3       UREA MOLDING COMPOUND           BLACK & BROWN               WHITE & IVORY               VINYL ESTER           COR RES    231 - 250     NAd       HEAT & COR RES    256 - 263     NAd

KEY: Colored areas indicate pricing activity. An arrow () indicates direction of price change. aTruckload, unless otherwise specified. bUnfilled, natural color, unless otherwise specified. cBased on typical or average density. dNot applicable. eNovolac and anhydride grades for coils, bushings, transformers. fNovolac and anhydride grades for resisitors, capacitors, diodes. gIn quantities of 20,000 lb. h19,800-lb load. jLME 30-day futures contract for lots of 54,564 lb..