Flat year seen for resin pricing.

Industry forecasts this year generally point to either flat or modest volume growth for major thermoplastics and thermosets, with no significant pricing moves currently projected. In the past two months, we have presented the consensus of industry predictions for LDPE, LLDPE, HDPE, PP, PS and PVC. This month completes our annual pricing outlook with a look at ABS, PET, PBT, polycarbonate, nylon, acetal, and unsaturated polyester resins, based on interviews with resin suppliers and other industry observers. With the exception of PET, there is considerable similarity among most of the forecasts.

STABILITY FORESEEN IN ABS

Pricing for ABS resins in 1992 is projected to remain largely stable, particularly in the case of standard grades, based on industry expectations of, at most, modest growth. Plant utilization rates, which dropped as low as 68% last year, are foreseen improving only as far as the mid-70% level this year.

"We don't expect erosion in prices akin to what we saw last year," says one supplier. "In some areas, such as pipe, prices declined by as much as 10|cents~/lb. But there were some other areas where prices remained stable." This source adds that the decline in ABS pipe resin prices was primarily a "reaction to import activity. We are hearing that at least one Far East ABS producer has plans under way to build an ABS resin plant in the U.S. sometime in 1992, with the pipe market as the main target."

STRONG PET DEMAND COULD LIFT PRICES

Good growth in demand for PET resins is expected to continue this year, with snug supply anticipated through the second and third quarters, at least. This will likely lead to upward pressure on prices.

Industry sources place PET growth rate for 1991 somewhere between 8 and 10%. "The past year was a very different experience for us, compared with suppliers of most other major-volume resins. This is largely because PET and the markets it serves are a whole lot more recession-proof than the other commodity materials," notes one leading supplier. Export demand, which also grew at a rate of about 10% in '91, is expected to remain equally strong this year.

Meanwhile, supply is expected to get tighter this year. "While the first quarter will be relatively quiet, since this is a traditionally slow time for PET, the second and third quarters will be very active. We expect supply to get very snug and to remain that way through the second and third quarters," says one supplier.

Although PET resin prices remained fairly stable through most of last year, two major suppliers say a move to increase prices around 5% can be expected as early as the beginning of second quarter.

ALL'S QUIET IN PBT PRICES

Little or no growth in demand is foreseen for PBT resins in 1992, and prices are projected to remain relatively stable. Says one source, "I don't see any changes in the first half of 1992, and possibly not even in the second half. There are no indications that the marketplace would support an increase." Another supplier notes, "Prices held roughly stable through most of 1991, and we see them as fairly stable now. Although we saw price erosion in the last few years, we think that this has bottomed out. We simply can't go down any further."

They also can't go up, it would seem, as long as the supply/demand picture remains the same. "There's more capacity than there is demand," says one major supplier. "Unless there is a significant change in the economy, this imbalance will last throughout 1992." Says another source, "With PBT's chief markets being automotive and electrical/electronic, people will have to start buying more cars, etc., before we see any improvement."

POLYCARBONATE PRICES ON HOLD

PC resin prices have remained relatively stable, considering flat demand, which is expected to remain that way in 1992. The last industrywide price increases were in fourth quarter 1990, and no further moves are anticipated any time soon. "We are aiming for as much price stability as possible," says one supplier, who concedes that some "pretty heavy discounting off list prices" has been taking place. On the other hand, he notes, "This has been on an account-by-account basis, not across-the-board."

Suppliers say 1991 saw a drop in PC demand of 3-4%. And even if economic recovery takes place, most suppliers feel it will be a slow process and the PC business will continue to face oversupply, both domestically and worldwide.

Resin producers place total U.S. PC capacity at around 800 million lb/yr and current demand at about 650 million lb. While industry analysts have pegged domestic growth of PC consumption at 6-8%/yr, suppliers are looking at the lower end of that range for the next couple of years, as a result of weakness in key construction and automotive markets, which account for about 35% of PC consumption. That suggests that existing domestic capacity could support domestic demand growth for three to four more years.

PC capacity utilization rates reportedly fell to around 82% in 1991, versus 90% in 1987. Says one source, "I would not be surprised to see utilization rates drop to as low as the high 70s or 80% this year as a result of the start-up of Dow's new PC facility in Germany. This is bound to reduce demand for U.S. exports." That situation will not be improved by more new capacity, which is planned for the next three years--specifically, two major projects for Dow and GE in Japan.

NYLON: ITCHY FOR AN INCREASE

Nylon resin prices, which eroded last year, are projected to remain relatively flat for most of 1992, with upward movement toward the end of the year. "We have considerable pressure from customers--particularly in automotive--to drop prices further. However, our costs did not go down, and so resin suppliers' margins eroded considerably in 1991. Rather than drop our prices, we're looking to provide value-added material to customers, and specifically in automotive, we're aiming to help those customers to find ways to reduce per-part cost."

If, as is widely expected, the economy begins to turn around in the second half of the year, prices are apt to move upward. "Our costs, including those related to increased demand for services from customers and environmental compliance, have been going up. Emissions regulations continue to become more stringent--we're looking at considerable capital cost expenditures," explains one supplier. Another adds, "We may not be facing upward pricing pressure from raw materials right now, but we did through a good part of last year, and we never passed on those costs to customers." This source foresees a price-hike attempt in the third quarter.

NO MOVEMENT IN ACETALS

Prices of acetals are expected to remain relatively stable this year. One supplier puts the case succinctly: "We were successful in pushing prices up for specialty resin grades in the fourth quarter of last year, but standard grades have remained unchanged. I don't see much possibility, if any, for a price increase in standard grades. There is considerable excess capacity as a result of the economic downturn. We are not projecting any significant growth this year--under 2%."

UNSATURATED POLYESTERS MAY FALL FURTHER

Already soft resin prices are expected to drift still lower by some suppliers. "While prices may have held somewhat stable for certain specialty grades, prices of general-purpose resins have eroded," says one source. "Since the beginning of this year, there's been a decline of around 2-3|cents~/lb for these resins, and I would not be surprised to see prices drop another 2-3|cents~ by the end of second quarter."

Another supplier sees resin prices no longer supported by rising styrene monomer prices, as they were in the fourth quarter of '91. "Monomer prices are expected to decline this year as a result of overcapacity. I see prices eroding slightly more within the first half, and then firming up--not necessarily increasing, but stabilizing."