Your Business Pricing Update - October 2008

At press time in mid-October, the impact of Hurricane Ike on Gulf Coast refineries and resin plants was still being assessed. Just a few suppliers had declared force majeure, although some, such as ExxonMobil, were placing customers on allocation and others were assessing the potential for such a move. Even though it could be weeks before the Gulf Coast chemical industry gets back to normal, observers last month doubted supply disruptions would be as great as in 2005 after Hurricanes Katrina and Rita.

Just before Ike struck, commodity resin prices seemed headed for a nosedive. Crude oil prices were slumping, as were those of petrochemical feedstocks. Domestic demand remained weak, but suddenly exports had dried up as well, removing the one prop that had held up domestic resin production. Resin suppliers’ inventories started swelling, and better price deals were in the air. It seemed clear that, barring a devastating event, polyolefin prices, particularly PE, were embarked on a downward path.

 

PE PRICES DROPPING

Polyethylene prices dropped in early September, wiping out the 7¢/lb increases that had arrived in July and August. While the price declines were not universal, they were expected to broaden by the month’s end. Another indicator, the London Metal Exchange (LME) North American short-term futures contract for blown film LLDPE, was 71¢/lb for October, down from September’s 75¢/lb.

Contributing factors: There was an uptick in PE resin buying in late July and August, ahead of the 8¢/lb price hike announced in August. Last month, that hike looked dead on arrival, according to Mike Burns, global business director for PE at resin purchasing consultant Resin Technology, Inc. (RTI) in Fort Worth, Texas. “There is no justification for higher resin prices,” he said. “Processors are only buying as needed. The export market is gone, and monomer prices are dropping.” Burns did not expect to see any significant PE price increases for at least six months.

Ethylene monomer contract prices settled at 74.5¢/lb in July, but there were strong indications that August-September contracts would be at least 10¢ lower. Ethylene precursor ethane dropped from $1.50/lb to 88¢/lb, back to where it was a year ago.

 

PP PRICES DOWN

Polypropylene prices dropped an average of 2¢/lb in August, and there appeared to be no chance the 6¢ increase due Aug. 1 would survive. More and possibly larger decreases in PP prices appeared likely before the storm arrived last month. What’s more, the LME North American short-term futures contract for October in g-p injection-grade homopolymer sold for 68¢/lb, down sharply from September’s 77¢.

Contributing factors: August contract prices for propylene monomer settled at 85¢/lb, but at press time, September contract nominations signaled an impending drop of as much as 20¢/lb. Spot propylene monomer was selling in the 50-53¢/lb range in late August and early September.

Said Scott Newell, director of client services for PP at RTI, “Expect a big correction in PP prices in September and October. Prices for PP could come down 20¢/lb by the end of September and another 5¢ in October.” He said PP suppliers’ inventories grew by 200 million lb due to lack of domestic demand and a big drop in exports—except to Latin America. However, he noted that unlike PE, the profit margins were so poor for PP, that PP resin prices could bounce back to some degree.

Addressing the uncertain impact of Hurricane Ike, one leading PP supplier says, “All bets are off” until things are assessed. “We have indication that propylene monomer will be very tight, and we went into the Hurricane event with only two- to three-day monomer inventories.” This source insists that no matter how much monomer prices drop, don’t expect PP resin prices to drop the same amount. RTI’s Newell says that prior to Ike, monomer inventories at most propylene suppliers had been growing consistently for over eight weeks. “We might see a tightening of propylene supply, but it will be short-term, as we were in good shape in terms of inventory build-up going into it.”

 

PET PRICES SAG

PET prices dropped 5¢/lb in August and September. Further declines are likely.

Contributing factors: PET tabs continue to track prices of feedstocks—paraxylene and ethylene glycol—which dropped 5.5¢/lb. Said Michael Dewsbury, PET global business director for RTI, if oil prices continue to drop, these feedstocks will drop further and PET resin prices will track them nearly penny for penny.

While PET suppliers implemented increases of 15¢ to 17¢/lb through July, margins were basically nil, as the increases exactly mirrored the price hikes of PET feedstocks. Dewsbury ventures that PET resin tabs could drop another 5¢/lb, if not more.

 

PVC: CALM AFTER STORMS

In mid-September, PVC producers were still assessing the disruption from Hurricanes Gustav and Ike earlier in the month, which caused extensive power outages, flooding, and disruption of transportation from the Gulf Coast to the Great Lakes. PVC producers lost one to two weeks of production to the storms.

Georgia Gulf put out a letter moving its 4¢ increase from Aug. 1 to Sept. 1, but it was not supported by other suppliers. Shin-Tech and OxyVinyls declared force majeure. Shin-Tech’s Freeport and Plaquemine plants restarted right away and are expected to be back in full production soon, but the Addis, La., plant is making repairs and is not expected to be working before the end of September. Formosa in Point Comfort has no major damage and is resuming full production, pending availability of feedstock. OxyChem is on sales control.

Contributing factors: With feedstock prices falling and demand very weak, processors had expected PVC prices to drop a penny in September, but hurricanes delayed that. The problem is getting people back to work, power back up and feedstock pipelines full again. Flooding has extensively disrupted rail shipping, both for incoming feedstock and delivery of product, much of which is moving in bulk trucks instead.

 

PS: DELAYED INCREASE

Ineos and America’s Styrenics both delayed hikes of 4¢ for crystal and 5¢ for HIPS from Sept. 1 to Oct. 1, a move not supported by Total in mid-September. America’s Styrenics was on allocation.

Contributing factors: Demand was very weak, processors say. The storm made feedstock supply the big issue, expected to keep prices level through September, despite falling prices for oil (under $100/bbl in mid-September) and natural gas. HIPS is a concern because two suppliers of butadiene declared force majeure. 

 

Market Prices Effective Mid-Sept 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    171 - 182      7.4 - 7.9       20% GLASS    177 - 190      7.6 - 8.2       30% GLASS    178 - 217      7.6 - 9.3       EXTRUSION    145 - 180      6.3 - 7.8       BLOW MOLD    150 - 185      7.0 - 7.5       STRUCT FOAM    149 - 181      6.4 - 7.8       20% GLASS    235 - 255      10.1 - 11.0       FR    166 - 197      7.1 - 8.5       CD    135 - 195      5.8 - 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)    86 - 88     4.6      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    154 - 164      NAd       ISOPHTHALIC    183 - 198      NAd       BIS-A    218 - 238      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    86 - 89     2.9      INJECTION    88 - 90     2.9      LID RESIN    90 - 92     2.9      LINER    87 - 89     2.9      CLARITY    84 - 86     2.7 - 2.8      EXTRU COATG    89 - 91     2.8 - 2.9      BLOW MOLD    91 - 93     2.9      LLDPE, BUTENE BASED           G-P MOLDING    83 - 85     2.7 - 2.8      LME 30-DAYj    71.0     2.2      FILM    88 - 90     2.8 - 2.9      ROTOMOLD    85 - 87     2.8      LLDPE, HAO-BASED           G-P MOLDING    86 - 88     2.8      LID RESIN    96 - 98     2.9 - 3.0      LINER FILM    89 - 91     2.8 - 2.9      HDPE           G-P INJ MOLD    83 - 85     2.6 - 2.7      FILM    93 - 95     2.8      BLOW MOLD    93 - 95     2.8      HMW-HDPE           BLOW MOLDING    90 - 92     2.8      FILM    91 - 93     2.8      PIPE    98 - 100     2.9      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    101 - 103     3.3      LME 30-DAYj    68.0     2.0      EXTRUSION FIBER    99 - 101     3.2 - 3.3      PROFILES    104 - 106     3.4      RANDOM COPOL    105 - 107      3.4 - 3.5       BLOW MOLDING    105 - 107     3.4 - 3.5      FILM    104 - 106     3.4      INJECTION    115 - 117     3.8      IMPACT COPOL    117 - 119      3.8       MED IMP    117 - 119     3.8 - 3.9      HI IMP    119 - 121      3.9       POLYSTYRENE (RAILCAR)           G-P CRYSTAL    98 - 104      3.7 - 3.9       HI HEAT    101 - 107      3.8 - 4.0       HIPS    103 - 109      3.9 - 4.1       SUPER HI IMP    109 - 115      4.1 - 4.3       FR    115 - 121      4.3 - 4.5       STRUCT FM (FR)    105 - 108      NA       EPS           UNMODIFIED  95 - 98    NAd       MODIFIED  96 - 100     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    61 - 63      NAd       PIPE  60   NAd       FILM    66 - 68      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 - 248      NAd       HEAT & COR RES    256 - 261      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..