Commodity Resins Will Be Soft.

* Weaker market demand and major new capacity lead resin suppliers to expect soft prices for polyolefins, PVC, and PS next year. PET prices may hold up, however, as demand is catching up with supply. Engineering resins are another story--prices there are still going up.

Dip ahead for PE prices

Southward is the direction polyethylene resin tabs are expected to take in 2001, particularly in the first half. This year is ending with two separate 3[cent]/lb hikes pending. Suppliers aim to implement the first for large-volume buyers on Dec. 1. The second hike won't be felt until early next year--if at all.

Contributing factors: Major new capacity was brought on stream in 2000 and more is expected early in 2001. Supplies are expected to be long through 2001 and into 2002.

Capacity expansions this year started with ExxonMobil's addition of 240 million lb/yr of LLDPE in Texas. In the fall, Union Carbide started up a world-scale plant at Prentiss, Alberta, with 1.4 billion lb/yr of LLDPE/HDPE swing capacity. It is expected to be fully operational this month. At the same site, Nova Chemicals is due to start up 840 million lb of LLDPE by the end of the year.

In the second quarter of next year, Formosa Plastics will bring on 880 million lb/yr of HDPE at its new plant in Texas. Also by mid-year, debottlenecking by ExxonMobil will add another 200 million lb/yr of HDPE capacity. Equistar is reportedly planning to shut down a 300-million-lb HDPE unit in Texas, although this was not confirmed at press time.

Overall PE market demand is expected to be softer. Growth projections range from a low of 1% up to 4% for all PE, with HDPE on the higher side.

PP prices to soften

Polypropylene prices are expected to be quite a bit softer next year. The last 2-3[cent]/lb hike was not broadly supported by suppliers and appears to have no chance of implementation this year. Suppliers say they may try again early in the first quarter.

Contributing factors: Resin makers say the PP business is at the bottom of a seven-year cycle. Monomer cost is just above the variable cost of making polymer. Although PP prices rose about 6[cent]/lb in the past year, propylene monomer prices went up 10[cent]/lb. And major new capacity on the horizon is likely to keep the pressure on resin tabs, no matter what happens to monomer prices.

Formosa Plastics will bring on 700 million lb/yr of new capacity in Texas. Half is coming on now, and the other half is scheduled for the second quarter. Meanwhile, Dow Plastics is starting up 450-million lb/yr in Texas this month. A joint venture of Union Carbide and oil refiner Tosco is due to start up a 700-million-lb plant in New Jersey next July.

That is the last new PP capacity scheduled for a couple of years. As a result, PP suppliers expect to see a turnaround. The big question is what will happen on the demand side. In 1999, PP markets grew 11-12%, while growth in 2000 is expected to be only 3%. Some suppliers say that it would take double-digit growth to make a dent in the coming flood of new capacity.

PET tabs stable

Prices of PET bottle resins are projected to be flat through the first quarter. An increase of 2-3[cts.]lb might occur in the normal peak demand season in the second quarter.

Contributing factors: Pushed by double-digit growth in worldwide demand, prices rose in the first and second quarters of 2000, a bit more in third quarter, and then leveled off in the fourth quarter. For 2001 and beyond, domestic growth is projected to be in the 10-12% range, while global demand will surge 17-18%.

After the gross overcapacity of a couple of years ago, PET resin supply and demand have come into approximate global balance. In the U.S., the only capacity expansion will be Nan Ya Plastics' start-up of 440 million lb/yr in South Carolina in the first quarter.

Prices of key feedstocks (PTA and ethylene glycol) were driven up this past year by energy price increases but are expected to level off at their current high levels.

PVC prices slip farther

After sliding throughout the Fall, PVC resin prices were expected to slip another penny in November.

Contributing factors: Pipe and siding makers say construction markets are recovering, but processors are still holding a lot of inventory in pellets and finished goods. They look for spring sales to improve, but not as strongly as in 2000.

Resin producers have cut their operating rates to the low 80% range, but a flood of new capacity is on the way. Shintech is due to start up 500 million lb/yr this month. Other resin producers plan to debottleneck some existing capacity after that. Formosa will add 500 million lb/yr through debottlenecking between next July and the end of 2002. In addition, Westlake could add 20-30 million lb this month, though it may not use the new capacity any time soon. Borden is also rumored to be planning 40-50 million lb of debottlenecking in the first half of 2001.

PS hike is deferred

Polystyrene prices dropped by another 2[cts.]/lb in late October and early November. Resin producers had sought to impose 2-5[cts.]/lb price hikes last month, until Chevron Phillips announced a 2[cts.] increase to take effect Dec. 1--a move that effectively postponed the increase until the new year.

Contributing factors: PS sales fell steeply in the third quarter. Resin producers say overall demand growth for 2000 could finish between zero and 1%--well below previous estimates of 2% to 2.5% growth. No new capacity is planned for 2001.

Engineering resins rise

Price hikes in engineering resins have been almost nonstop since the summer. Dow Plastics upped ABS and SAN tabs by 5[cts.]/lb Dec. 1. ABS pipe and fitting grades went up only 3[cts.]/lb. Bayer hiked its ABS pipe and fitting resins 3[cts.] on Nov. 15.

Dow's polycarbonate and PC/ABS blends were bumped up 8[cts.] and 7[cts.]/lb, respectively, on Dec. 1.

In October, DuPont and Ticona announced an 8[cts.]/lb increase on acetals, effective Nov. 1. BASF later followed suit with a similar increase for Dec. 1.