Your Business Pricing Update - October 2007
Market Resists Price Increases
Despite roaring exports and some slight increases in monomer prices, slow domestic demand is keeping a lid on polyolefin and PVC prices for the moment.
Despite roaring exports and some slight increases in monomer prices, slow domestic demand is keeping a lid on polyolefin and PVC prices for the moment. A PS hike was announced by some producers for Oct. 1, but several major players had not chimed in by press time.
PE prices holding
Although polyethylene suppliers had not officially delayed either of their two September price hikes (4¢/lb for Sept. 1 and 5¢ for Sept. 15) by the middle of last month, it did not look as though they were being implemented. Suppliers appeared intent on pushing through at least the 4¢ increase, even if only partially or with a one-month delay. Meanwhile, The London Metal Exchange (LME) short-term futures contract for October in blown film butene LLDPE sold at 57.1¢/lb, down from September’s 58.1¢.
Contributing factors: Suppliers are not likely to rescind their increases, which they blame on the high cost of ethylene monomer. August ethylene contracts moved up 1¢ to 48-49¢/lb, and hikes of 2¢ to 3¢ were pending for September. Suppliers’ plant operating rates continued at 95% to 96%, owing largely to export demand. The Plastics Div. of the American Chemistry Council shows domestic PE demand down 1.8% for the first half of 2007 but exports are up 32%.
According to Mike Burns, global PE business director at resin purchasing consultant Resin Technology, Inc. (RTI), Fort Worth, Texas, “In August, people could buy PE resin cheaper in secondary markets for the first time all year. There are also indications that export activity, which has been ridiculously high all year, is slowing down.” He expects that suppliers will be hard-pressed to push through the September increases and notes that some price softening can be expected as we enter the slower end of the year. On the other hand, he cautions, “I don’t expect that we will see the major drop in PE prices that took place in fourth quarter of 2006.” For the time being, RTI advises processors to buy resin only as needed, and watch what happens over the next 30 to 60 days.
PP prices flat
Polypropylene prices appeared likely to hold last month, despite the 3¢ increase posted for Sept. 1 by several major suppliers. Meanwhile, LME’s futures contract for g-p injection-grade homopolymer for October sold at 57.4¢/lb, up slightly from September’s 57¢.
Contributing factors: While it’s unlikely that suppliers will rescind their September increase, PP prices were not expected to move last month. PP has been closely tracking propylene monomer prices, which moved up 1.75¢/lb in August, but September contract prices were expected to drop 2.5¢ to 2.75¢/lb.
Lowell Huovinen, RTI’s v.p. of client services, sees demand as the main factor driving PP prices for the rest of the year. “Prices are already too high for processors to pass through to their customers. While this is traditionally a busy time, a lot of processors have idled production because business is slow. When they see monomer prices going down, they expect some resin price relief.”
Huovinen notes that because energy prices are so high, he does not expect PP prices to drop dramatically. Resin plant operating rates continue to be in the low 90% range, thanks mainly to exports. If exports slow significantly, resin suppliers will be holding a lot of inventory, he notes.
PVC demand soft
PVC prices were flat as of mid-September, with no price announcements on the horizon. Processor demand turned softer in siding and windows and was expected to weaken further. Only exports were holding resin prices up.
PS hike for October
After PS prices slumped 4¢/lb in the last two months, Dow and Total announced a 3¢/lb hike for Oct. 1, but there was no word from other players by mid-September. PS demand was down 5.6% through July, but EPS was up 3.9%.
Meanwhile, the Nova/Ineos joint venture was approved by the Federal Trade Commission Sept. 10 and is expected to go live Oct. 1. Dow and Chevron’s joint venture is expected to be approved soon too, reducing the market to three roughly equal players.
| Market Prices Effective Mid-Sep A |
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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.. |
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