Your Business Pricing Update - September 2007
Is Price Pressure Easing?
Most commodity resin prices —except for PP—took a breather in August, though some hikes were pending for September.
Most commodity resin prices —except for PP—took a breather in August, though some hikes were pending for September. But some industry observers think polyolefin prices could be at or near a peak.
Suppliers push PE hikes
Polyethylene prices held even last month, despite suppliers’ efforts to push through a 4¢/lb hike. Some producers delayed the hike to September, and Nova and Equistar issued a new 5¢ increase for Sept. 15. The London Metal Exchange (LME) North American short-term futures contract for September in butene LLDPE for blown film sold at 58.1¢/lb, up from August’s 55.3¢.
Contributing factors: “Keep an eye on ethylene monomer” is the advice of Cindy Bryan, director of market research at resin-purchasing consultant Resin Technology Inc. (RTI), Fort Worth, Texas. July monomer contract prices rose 2.5¢/lb to a high of 48.5¢. Increases of 1¢ to 3¢ were on the table for August. Says Mike Burns, RTI’s global business director for PE, “We see ethylene and polyethylene resin prices approaching a market peak. Right now, I don’t think that we’ll see ethylene contract prices or PE resin prices moving up much more. But this could change if there were an upsurge in exports or any production disruptions.”
While resin exports have been strong, domestic demand is hard to gauge. By August, there appeared to be a slight improvement in areas such as film, but this was attributed largely to prebuying in anticipation of a price hike this month.
PP prices up
Polypropylene prices moved up 3¢/lb in July and August as suppliers aimed to implement 4¢/lb increases. Basell issued a new 3¢ increase for Sept. 1. Meanwhile, LME’s September North American futures contract for g-p injection-grade homopolymer sold at 57¢/lb, down from 58.74¢ for August.
Contributing factors: Domestic demand grew a little less than 1% through June. RTI managing partner Scott Newell says industry statistics now include Mexico—otherwise they might show flat or negative growth for the first half. However, exports have kept suppliers very busy. Despite a drop in exports to China, buyers in Latin America, Europe, and Africa have taken up the slack.
Propylene monomer contract prices hit a record high in August due to supply problems. Monomer rose 1¢ in July and 1.75¢/lb in August. Says RTI’s Newell, “We think August may be the peak for prices of monomer and PP. We saw monomer spot prices drop lower than contract prices, which is a strong sign, and there is evidence of monomer inventories increasing.” He attributes that to resolution of earlier production problems and to a drop in gasoline prices, which makes more propylene available for PP.
PET prices holding
PET prices have held firm since an increase of 2¢/lb in May, despite a failed attempt to raise prices another 4¢/lb. Looming overcapacity prevented PET suppliers from raising prices during the summer. “Feedstock prices have gone up more than PET resin prices over several months,” complained one major producer. Despite new capacity coming on stream, domestic demand continues to grow at around 6% to 7%/yr, consuming an additional 500 million lb per year. Also, export volumes, particularly to South America, have been robust. Resin plant utilization rates are still said to be in the high-80% to low-90% range.
But more new capacity has been announced by two suppliers. M&G will build a new PET plant at a still undisclosed U.S. location. Two-thirds of the planned 1.8-billion-lb capacity will come on stream in the first half of 2009. M&G also plans to debottleneck PET capacity at plants in West Virginia and Mexico, which is expected to add an additional 440 million lb of capacity by 2008. And as reported in May, Indonesia’s Indorama Polymers plans to build a second U.S. PET plant for its StarPet subsidiary. The 650-million-lb plant is scheduled for start-up in late 2008.
PVC hike stalls
Georgia Gulf and OxyChem announced 3¢/lb increases on PVC resins for Sept. 1, but Shintech reportedly told customers it won’t follow suit, so prices aren’t expected to move this month.
PS prices moderate
PS prices slipped 2¢ to 3¢/lb since June. Demand was still relatively good in mid-August, but feedstock prices were softening. Contract benzene for August was $3.59/gal. Spot prices dropped 20¢ to 30¢, so contract benzene in September is expected to be about 20¢ lower.
| Market Prices Effective Mid-Aug 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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