Higher prices for PP, PS, PVC.

Higher Prices for PP, PS, PVC 

In an attempt to halt falling prices, 10 of the 13 major polypropylene suppliers raised tabs 3[cents]/lb, effective the first of this month. Whether selling prices will actually rise is still in doubt, however, as suppliers and processors alike acknowledge that discounting is still rampant. Meanwhile, at least two polystyrene suppliers and one unsaturated polyester supplier raised resin prices to compensate for higher styrene monomer costs.

In other news, PVC prices took a surprise turn upward at press time, while ABS resins slid further last month, owing largely to slower demand and higher supplier inventories.

PP PRICES MOVE UP

In what appears to be an effort to halt further PP price erosion, 10 major suppliers of these resins have announced price increases of 3[cents]/lb, effective February 1. This move was initiated by Himont, Inc., and was quickly followed by Aristech Corp., Soltex Polymers Inc., Fina Oil & Chemical Co., and Quantum Chemical Corp. before five others joined in as we went to press. The other three major suppliers - Phillips 66, Shell Chemical, and Novacor - have not supported this increase.

Factors that precipitated this move, according to a key source at Himont, include a resurgence in exports, increased demand within existing market applications, and increased demand for applications being captured from other plastics. Sources at Soltex, Aristech, and Fina also point to a stronger export market, as well as an overall upswing in domestic demand. Says a source with one supplier, "We had a stronger month in December than expected, and January is shaping up very well both in terms of domestic buying as well as exports."

Meanwhile, a source at Phillips 66, which has not supported the price increase questioned the move: "Propylene is dropping in price, demand is still slack for PP, and we're all running at mid-80% utilization rates . . . I don't understand this move." A source at another supplier not supporting the increase noted that while announcing price hikes for February is "highly unusual in this business, demand really has been on the upswing across the board." [Tabular Data Omitted]

In general, the five suppliers that first announced February hikes say they expect PP prices to stabilize as a result of this move, despite the fact that discounting continues to take place. Says one source, "Large-volume buyers are still trying to get that 1-2[cents]/lb discount, and they are getting it in some cases. However, I would say that we have seen less of that in the last month. I would also venture that everyone will now try to position themselves, and as they do, there will be some further competitive pricing activity. After that, I think things will settle down." Some processors and industry observers still maintain, however, that the current level of discounting will keep selling prices down despite list hikes.

The potential for higher propylene monomer prices may contribute to firmer PP prices. Sources at some propylene producers interviewed in early January say the feedstock's prices bottomed out in December, but will soon begin climbing as supply tightens. Unexpected freezing temperatures at the end of December caused a slew of water pipes around the U.S. Gulf Coast to burst, resulting in widespread shutdowns of petrochemical refineries in the area, including those that manufacture propylene and styrene. Also, some sources interviewed report that propylene inventories originally intended for polymer production are being diverted to the more profitable fuels market.

PS PRICES ON THE RISE

Huntsman and Fina announced to their customers that it would increase prices of polystyrene resins 3[cents]/lb across the board. Fina's increases are effective February 1; Huntsman's, February 19. At press time, the other major suppliers, including Dow and Polysar, had not as yet supported the move.

A source at Fina says that the company's move to hike PS resin tabs is driven by cost increases in key raw materials. "We're primarily referring to styrene monomer prices (up 3 1/2[cents]/lb), as well as butadiene price increases (up 4[cents]/lb since September), which affect high-impact grades. Higher styrene monomer costs are being blamed on cold-weather-induced refinery shutdowns as well as a fire at a Taiwanese producer.

UNSATURATED POLYESTER UP?

At press time, Reichhold Chemicals announced a price increase of 2[cents]/lb, effective February 1, for general-purpose unsaturated polyester grades. The company says this is the result of the recent round of increases in styrene monomer prices. No other supplier was prepared to comment on the Reichhold increases at press time.

The Reichhold announcement comes despite predictions of continued price erosion for unsaturated polyester through 1990, due to plunging demand in key markets. By mid-1989, sales volumes for these resins in the marine industry reportedly dropped more than 25%. "With the exception of specialty boats, we don't see this industry rebounding in 1990. In fact, we expect the marine market to be worse than the automotive market for these resins," says a spokesman for one major supplier. He adds that demand for these resins in both the construction and the industrial corrosion markets has been "relatively stable."

The unsaturated polyester business has been very competitive of late, and sources interviewed prior to the Reichhold announcement say they expect price cutting to continue. Further downward pricing pressure could also result from diminishing costs of some raw materials. "Despite styrene's recent price increases, we anticipate that the monomer's price will start dropping again," says one source. Other raw materials whose price fluctuations may have an effect include ethylene, ethylene glycol and other glycols, as well as maleic and phthalic anhydride.

Prior to the Reichhold announcement, selling prices for general-purpose unsaturated polyester resins were quoted as low as 52-56[cents]/lb, down from 55-59[cents]/lb in mid-1989. Selling prices for isophthalic grades are as low as 55-59[cents]/lb, down from 62-67[cents]/lb in mid-1989. Selling prices for specialty grades (bis-A, etc. - for automotive and construction) were still selling at between $1.10-$1.35/lb.

PRICE HIKES FOR PVC

At press time, it suddenly appeared that PVC price increases of 3[cents]/lb will hit industrywide between February 1 and March 1. BFGoodrich, Occidental, Vista, Shintech, Borden and Air Products supported this move, except that Occidental announced a 2[cents]/lb hike, since its prices reportedly were 1[cent] higher to start with. PVC processors say supply is tight because of December's cold snap that resulted in loss of production, and because of an unforseen pick-up in demand, accentuated by very low inventories throughout the supply chain. (Look for a more detailed analysis in next month's Pricing Update.)

LOW DEMAND PUSHES DOWN ABS

ABS resin prices are eroding further, as demand in key markets slows and inventories at suppliers are building up.

Price cutting of as much as 4-5[cents]/lb is reported by buyers and industry observers. Sources at two companies that used to import ABS resin from the Far East (Korea and Taiwan), say they have stopped this activity all together. Says one source, who does not expect to see any change in the near future, "For the last three quarters of 1989, we found it unprofitable to continue with our ABS importing business. The key factor is the decrease in demand in the automotive market and the drop in housing starts. In addition, the 10% duty imposed on these materials made it even harder to compete." This source also points out that despite higher styrene monomer costs, ABS prices are not likely to firm up as a result, as the resin's current price erosion is primarily a supply/demand issue.

Says a source from another company that has also stopped importing ABS material from the Far East: "We are buying from domestic ABS producers, since we can get much better prices. They appear to have so much material to move, that they've gotten even more aggressive with their pricing."

Large-volume buyers are generally paying prices of under $1/lb for most ABS resin grades. Whereas a little over a month ago, medium-impact ABS resin was selling at $1.05-$1.10, prices as low as 90-93[cents]/lb are now being reported. Current selling prices for high-impact grades, which typically sell for a premium over medium-impact, are reported in the mid-to-upper 90[cents]/lb range, down from $1.10-$1.15[cents]/lb.

A source at a leading supplier still maintains, however, that "price cutting is not as widespread as some claim," noting that most buyers are still paying over $1/lb for most ABS grades. He adds that higher feedstock costs, particularly for butadiene, could force ABS prices up in the future.

RECYCLED PET, PE FIRM UP

Demand for recycled PET, described as twice as high as available supply, is serving to keep prices of recycled PET resin firm, despite industry-wide 3[cents]/lb price decreases for virgin PET resin announced late last year. Prices for recycled HDPE and L/LDPE are also firmer - or even "a couple of cents up," as one recycler puts it - following recent price increases for the virgin material.

According to one PET recycler: "In essence, we have an anomaly, whereby pricing for the recycled material is not decreasing in conjunction with that of virgin resin. The fact is that there's currently only a limited amount of PET material being collected."

Recyclers say that demand for recycled PET will continue to grow through next year, but at some point prices may begin to decline like those for virgin grades. Current prices for recycled PET are as follows: crystallized clear PET in pellet form - about 40[cents]/lb; clear flake material - mid-30[cents]/lb range; green flake material - low 30[cents]/lb range; and solid-state - as high as mid-40[cents]/lb range.

Recyclers expect some changes in this industry as curbside collection replaces bottle-deposit programs. Says one source, "We expect we'll have a new category of recycled PET material - a result of more curbside-collection programs. Since the technology is not yet there for separation/cleaning of PET bottles collected as post-consumer waste, I expect that there will be a degradation of quality in recycled PET."

PE recyclers interviewed recently say that prices for these materials are firm but stable, and are expected to stay that way for at least the first and possibly the second quarter of 1990. "This is not surprising since these materials closely track the pricing of virgin, resin, particularly in the case of HDPE," says a source at one large West Coast recycling firm. "Moreover, we have seen a vast improvement in demand for recycled L/LDPE extruded films in the last couple of months."

Recyclers say that recycled HDPE is selling for 18-22[cents]/lb, with extrusion grades on the lower end and injection grades on the higher end; recycled L/LDPE is reportedly selling for about 21[cents]/lb.

Demand for recycled HDPE is also said to be up, and is expected to get stronger throughout 1990. "We expect pricing to stay rather firm for the early part of 1990," predicts one PE recycler. "After that, we expect prices to decline somewhat, following what we think will happen with virgin resin as new capacity comes on the market."

FORECAST: EPOXY PRICES STABLE

Relatively stable pricing, as well as slightly higher sales volumes compared with 1989, are projected for epoxy resins throughout most of 1990 by sources at leading suppliers. "We're entering the new year with some momentum in terms of pricing," says one supplier's source, referring to two industry-wide price increases announced last year. For 1989, suppliers place overall growth of epoxy resin sales at about 4-5% over 1988, and expect another 2% growth this year.

Resin inventory levels, according to suppliers interviewed, are "well balanced, if not a bit tight," with no major capacity scheduled to come on stream in 1990. "I would say inventory levels will continue to be balanced. Suppliers have been very good at managing this aspect of the business," says one source.

While prices of key raw materials are expected to be soft in 1990, suppliers interviewed maintain that the supply/demand factor will determine pricing for epoxy resins. While a few say there's a possibility of seeing somewhat higher prices in the second half of the year, most tend to think that prices will hold steady for 1990.

Additives Pricing

CHROME PIGMENT PRICES UP

Prices for pigments facing more stringent environmental regulations, such as those that are chrome-based, are expected to go up by as much as 8-10% in the first quarter of 1990.

In recent years, pigment producers have had to expend considerable capital on pollution-abatement equipment. Profit margins within the chrome-pigment industry alone are said to have fallen considerably, with four manufacturers dropping out of the business within the last few years. In addition to the steeper production costs resulting from new regulations, these increases are also being driven by higher raw-material costs, say suppliers. Prices for both chrome and lead metals have been rising, for example.

Pigments that are expected to go up in price by as much as 8-10% in the very near future include chrome yellow, chrome green, zinc chromate, and moly orange.