PVC Up, PS Stable, PE and PP Down.

* PE and PP prices are expected to soften in 2000 under the weight of new resin capacity and a retreat from this year's double-digit demand growth. It's a different story for PVC, which is tight globally. Prices will probably rise, but not a lot. PS prices, however, are going nowhere.

PE prices to weaken

Industry sources are extra cautious about projecting price trends for 2000. Last year's consensus forecast of slumping polyolefin prices for 1999 turned out to be dead wrong. This unforeseen outcome was the result of higher-than-anticipated demand throughout the year and tightness in resin feedstocks due to unplanned outages.

The unexpected rise in PE prices during 1999--an average of 16-18[cent]/lb--is beginning to slow as the year comes to a close. The year's sixth increase of 5[cent]/lb may be more difficult to implement than previous hikes. Its effective date was pushed back from November to Dec. 1.

Resin suppliers say next year's PE prices will either stay where they are through the first half or could start sliding as soon as the first quarter. "We don't think prices will collapse as they have in previous years," says one major producer. "Feedstock prices could go anywhere next year. While some analysts are projecting a downward trend based on lower crude-oil prices, others are projecting the opposite." Some of those analysts think PE prices will remain stable or possibly even move upwards.

Contributing factors: Suppliers say ethylene monomer is still fairly snug. Its price was expected to rise another 1[cent]/lb in November. On the other hand, resin business could be slow through February while processors work off inventory accumulated as a protection against Y2K disruptions. But suppliers believe demand will still be good next year--in the range of 5-6% above '99 levels. Overall growth in demand for the first eight months of 1999 was 11-12% for LLDPE and HDPE and 4-5% for LDPE.

In 2000, new capacity will include Nova's 770-million-lb LLDPE/HDPE plant, Union Carbide's 990 million lb of LLDPE/HDPE, and Exxon's 200 million lb of LDPE.

PP: stable or softer

Projections for polypropylene prices in 2000 range anywhere from slight slippage to a slight increase. "Be prepared for the possibility that you will pay more for PP next year. Suppliers will either drag their feet about lowering prices or they will have to increase prices, depending on what the feedstock prices do," says Houston-based consultant Bill Kulke of Kulke Associates. A source at market-research firm ICIS-LOR in Houston projects PP price stability for most of 2000. Others predict some decline in prices next year, but not below February '99 levels.

Meanwhile, the fifth PP price hike in 1999 was set for Dec. 1. The 3[cent]/lb increase was initiated by Amoco and appeared to be gaining support at press time, though there was no word from Montell and Exxon. The move followed implementation of 2[cent] out of a planned 3[cent]/lb hike in October.

Contributing factors: The five announced increases in 1999 added up to 13-14[cent]/lb, of which suppliers had implemented only 7-8[cent]/lb by mid-November. Industry sources were fairly confident that another 1-2[cent] would be in place by year's end. Their confidence was based on double-digit demand growth, low supplier inventories, and rising monomer prices.

Propylene monomer prices went up another penny in November, on top of a 3[cent]/lb rise during the two previous months. Some industry sources expect propylene prices to continue upwards for the time being.

Most say that the PP price hikes implemented in 1999 cannot erode unless monomer tabs drop significantly. Resin makers' profit margins are said to be very tight, since prices of monomer went up faster than they did for PP resin.

However, it appears fairly certain there will be overcapacity in 2000-2001. PP suppliers added about 1.4 billion lb/yr of new capacity in the second half of 1999. Epsilon brought on 800 million lb and Aristech 550 million lb. Arco Products was slated to start up 440 million lb by mid-December. Much of this new capacity is already spoken for, so it will not have a big impact on prices. But there's more to come. Exxon is due to bring on stream around 600 million lb in the second quarter, and Dow is scheduled to launch 550 million lb before year's end.

Demand for PP grew by 11-12% in 1999. Growth projections for 2000 range from 8% to 11%. However, some suppliers say it has been difficult to ascertain how high processors' inventories are, and they expect to encounter some inventory readjustment in the first quarter.

PVC markets tight

Resin producers expect an increase of 2-4[cent]/lb during the first half of 2000, though prices could fall back a little bit late in the year. At least one market analyst's published forecast predicts G-P resin prices above 40[cent]/lb throughout 2000.

No one predicted any increase in PVC prices tbis past year, when tabs rose around 11[cent]/lb. The turning point came in June, when three VCM monomer plants had outages at once. That immediately dried up the PVC spot market and pushed nervous buyers into longer contracts.

At press time, the pricing story for 1999 was not yet over. When Shintech failed to support OxyChem's Oct. 1 increase of 2[cent]/lb, OxyChem came back with 2[cent] price hikes for Dec. 1 and Jan. 1. Formosa supported both hikes, and other producers were expected to go along with at least the December increase. But Shintech was still silent in mid-November.

Contributing factors: PVC demand for '99 is expected to end the year up 3-4%. Construction demand is expected to moderate in 2000. "If housing starts fall 10%, that means 5% lower consumption of PVC--but we could move that much into the export market," notes a large PVC producer. Export demand was down about 30% in '99, but both demand and spot prices abroad are on their way back up. Resin is tight globally.

Domestic PVC capacity isn't growing. The only new plant in sight is Shintech's recently approved 1.3-billion-lb/yr site in Louisiana, which won't start up until late 2001. Debottlenecking in 2000 could add about 300-400 million lb of capacity. Suppliers say their operating rates were as high as 93% in the fourth quarter of'99 and could hold that level for 2000.

PS prices will flatten

Polystyrene producers have gotten used to low expectations since their "bloodbath" in 1997. Over the past two years, PS prices rose steadily, but not high enough to get suppliers out of the red, they complain. Next year, they hope just to break even.

Producers expect to get 2[cent] of the 3[cent] hike that was announced for October. That would roughly pay for their lost profitability in the third quarter, when PS prices rose 6% and their feedstock costs rose twice as fast.

Nova and BASF both announced 4[cent]/lb increases for Dec. 1 on PS (but not EPS). Chevron and Dow followed suit, but Fina broke ranks and announced a 3[cent] hike instead. When that increase takes full effect in January, it may be the price peak for the year.

Contributing factors: PS demand is expected to grow around 3%. as it did in '99. Very little new capacity is on the way.