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Stable prices forecast for key TP's.

Stable Prices Forecast for Key TP's

With leading economic indicators pointing downward for 1990 and projections that key feedstock prices will remain soft, suppliers of thermoplastic resins interviewed last month predicted relative price stability for these materials throughout the year.

For commodity resins, the only wide-scale price increases on the horizon are those already announced by PE suppliers for the first quarter. A possibility does exist, however, that PS prices will go up this month as a result of styrene monomer price increases issued in December, although this remains doubtful. Prices for PP and PVC are expected by industry sources to continue soft throughout most of the year.

Stable pricing is also expected in major engineering thermoplastics, including nylon, PBT, ABS and acetal. Polycarbonate, however, could see lower prices.

Below, we take a closer look at pricing forecast for these resins, derived from interviews with major material suppliers and top analysts of the polymer and petrochemicals industries. In subsequent issues, we will present 1990 pricing forecasts for other key engineering thermoplastics such as PPO/PPE, as well as major volume thermoset resins, such as unsaturated polyesters and phenolic compounds.


Almost all major PE suppliers say they expect to be selling resin 3^/lb higher this month as a result of their recent price increases--even those suppliers that issued 5^/lb hikes. Sources at those suppliers say that while they will not modify their originally announced price increases through any formal announcements, they were ready to meet market prices.

Beyond this latest round of hikes, PE prices are expected to remain firm in the first half of the new year, according to sources at major suppliers, who say they have been running at very high utilization rates since late October--about 95-97%, rates that resemble those of 1988 rather than last year's, which were in the 80-85% range. At least one source, however, expects utilization rates to drop back to the 85% range in the second half.

"The current thinking--whether you're talking about LDPE, LLDPE or HDPE--is that pricing will be pretty stable for the first three to six months. When the new plants come on stream around the second quarter, the scenario may change. A lot will depend on how well they come up, and on how much of that new capacity has already been committed," says a source at one major supplier. While he does not expect prices to drop in the second half of the year, he says "they are likely to moderate."

With the exception of a few specialized HDPE grades--such as crosslinkable rotomolding and very-high-molecular-weight pipe grades, no real shortages in this have actually occurred, or are expected to, a result of the loss of the Philips 66 HDPE plant in Pasadena, Texas, Oct. 23. In fact, it now appears that the total available material at HDPE suppliers at the time of the accident--estimated at just over 1 billion lb--was able to sufficiently make up for what was lost in most cases. In addition, between tolling agreements that have reportedly been set up between Phillips and certain other PE suppliers, as well as new capacity the company will soon bring on stream, it is believed that Phillips will actually have about 75% of its HDPE capacity available quite soon. The company accounted for 18-19% of U.S. HDPE production.

Most of the significant new capacity expansions between now and 1991 are for HDPE and LLDPE, with only incremental expansions in LDPE. Inventory levels for LL/LDPE resins were very low by year's end. As a result, if the LDPE snugness continues, prices will hold firm or move upwards, according to some industry observers.


Price decreases in propylene monomer, and what some in the industry perceive as an overcapacity situation, are the two key factors behind the erosion of PP prices that took place through 1989. Some industry sources predict that these two factors will continue to play a part in further depressing PP resin prices through 1990.

Through 1989, PP prices, in general, dropped by close to 15^/lb. Bulk prices for injection molding grades of PP were reported as low as 37-38^/lb in fourth-quarter 1989, at some large annual-volume contract buyers. Sources at suppliers concede that if monomer prices drop even further, as predicted by some analysts, PP prices will follow. One source said he would not be surprised to see injection-grade PP hit as low as 35^/lb upon entering the new year.

Conversely, a source at a leading supplier said suppliers will make an effort to halt further price erosion if feedstock prices drop again. "I see PP suppliers making a move similar to what was originally attempted by some LL/LDPE suppliers: announcing a price increase, say of 3^/lb, mainly in an effort to stop further price declines."

In general, however, industry sources say that propylene monomer has the potential of dropping by another 5^/lb through 1990. "Should this happen, I would expect further downward pressure on PP prices, with the possibility of price decreases on the order of 1^/lb per quarter for all basic PP grades," says a source at one major supplier.

Domestic demand is expected to grow at a steady rate of 3-4% through 1990, and an increase in exports is expected to reduce the probability of an oversupply.


Sources at PS resin suppliers say they expect prices to be more stable though the new year than in 1989, owing largely to the firming up of styrene monomer prices, and to more balanced supply/demand.

Following styrene monomer producers' price-increase announcements for December--about 3.5^/lb--some industry analysts speculated that PS suppliers would make a move to increase polymer prices before year's end, or in the first quarter of 1990. However, sources at PS suppliers declined to comment. At press time, the verdict on December styrene monomer contract prices was still not in, but it was believed that prices would settle at a 3^ higher level.

Some industry analysts say that rather than issue price increases that would only hold for a short period, PS suppliers may end up choosing to hold back for at least the first quarter. This will depend on how much the monomer actually does go up, and whether suppliers can live with the resultant margins. "I expect prices to stay pretty stable for most of the year. Quite a bit will hinge on what happens to benzene and styrene monomer pricing," says a source at a major PS supplier.


With leading economic indicators pointing downwards for 1990, and particularly with a continued slump expected for the construction industry, as well as falling feedstock prices, domestic market sales for PVC resins, are at best, expected to remain flat, with further price erosion also expected.

"If forecasts for slowed GNP and industrial production, as well as a further drop in housing starts, actually hold true, domestic PVC market sales will be even lower in 1990 than the -2.1% we experienced in 1989. At the most optimistic, we can expect demand to remain flat," says a source at a major supplier. While through August of 1989, there was a nominal 1.4% growth in PVC sales, owing largely to a good export market, there was the more than 2% decline in domestic market sales, driven by falling pipe resin sales--down 6% in 1989 from the year before.

Also adding to this downward pressure is the 1.6 billion lb/yr of new capacity scheduled to come on stream in 1990 and 1991; 825 million lb/yr expected by the end of 1990, and another 830 million lb in 1991.

Some industry analysts project pipe grades to drop to a low of 30^/lb in the first quarter and as low as 26^/lb by the end of the fourth, averaging 27-1/2^/lb for the year.

Despite the continued slow demand expected for pipe resins, other PVC markets are expected to continue strong, according to sources at suppliers. These include siding and window profiles. Suppliers also say PVC resin sales for calendered goods, as well as dispersion-grade goods are expected to continue to do well.


Following the industrywide move made in the fourth quarter of 1989 by PET suppliers to reduce selling prices for PET resins across-the-board by 3^/lb, PET resin is said to be much more favorably positioned to compete with glass and aluminum, according to some supplier sources, including one at leading producer Eastman Chemical, who puts the 1990 forecast for PET pricing this way: "We expect prices to stay stable--just where they are, after the recent decreases."

The fourth-quarter industrywide move, initiated by Eastman, was spurred by cost decreases in key raw materials--ethylene glycol and paraxylene--but also represented an effort by suppliers to "reposition" PET so that it could more effectively compete with glass and aluminum in soft-drink markets. For much of 1989, slower demand for bottle-grade resin, along with new resin capacity was creating what some termed as an "oversupply situation."

In terms of growth for 1990, some suppliers' sources are rather bullish. Says one, "We anticipate a much higher growth rate than last year--possibly as much as 12-15%. For one thing, our prices are now competitive with glass and aluminum, for which, incidentally, there's tremendous pressure to boost prices." Another source points out that ethylene glycol and paraxylene raw materials are expected to continue dropping in price.


Increased competition, diminished feedstock prices, and a slower economy are three key factors that will serve to keep prices of major engineering thermoplastics--nylon, acetal, PBT--relatively stable in 1990.

Sources at suppliers of these resins interviewed recently say they have no plans to issue any across-the-board price increases in the new year. Additionally, they concede that due to increased competition, price discounting that took place for some of these resins through much of 1989 could continue in 1990.

Demand, in general, had slowed by the end of third quarter and into the fourth. A source at one major supplier said, "Our business has slumped, we've seen our inventories build, and we're particularly concerned with what will happen with the automotive industry in 1990." Very strongly competitive markets are anticipated to emerge, particularly in the case of nylons and acetals, as a result of new capacity that will be forthcoming from plant expansions, joint ventures, and competition from abroad, putting further downward pressure on pricing.

One exception to the above general forecast of relative price stability, where a possibility of price increases exists, is in nylons. Price hikes could be driven by increases in cost of certain raw materials--butadiene, in particular. This had been going up through the end of 1989, due to worldwide tight supply, and some sources expect it to increase once more in January. However, it is also expected to stabilize, or perhaps even drop again, after the first quarter, according to some analysts.


Higher resin inventory levels at suppliers, lowered feedstock prices, and slowed growth anticipated for such key markets as automotive, housing/construction, and electronics in 1990, are expected to result in relative price stability for ABS.

For much of 1989, ABS prices held pretty firm as a result of high demand, according to sources at ABS suppliers interviewed. However, by early fourth quarter, demand had slacked off, inventory levels were building, and prices of key feedstocks--styrene monomer and acrylonitrile--continued to drop, all of which forced suppliers to reduce selling prices by about 3-4^/lb across-the-board.

For 1990, suppliers say resin prices should generally stay at the current levels. However, some suppliers do not rule out the possibility that ABS prices may slip further if feedstock prices dropped dramatically and/or demand dropped more than is currently projected.



The combination of a slowed economy and significant new capacity that was brought on stream through 1989 is expected to result in relatively stable, if not softer, pricing for polycarbonate resins through 1990, according to major suppliers interviewed recently. "I would say that, globally, the picture for PC, as a result of the new capacity that is now on stream, will be somewhat looser through 1990, as compared to 1989," says a source at one major supplier.

Supplier sources say that while they hope prices will hold where they currently are, they do not rule out the possibility of price declines. "I definitely see a downward pressure, due to the capacity issue and the economy forecasts. In addition, we have already seen, although not widespread, some pretty aggressive pricing take place," says one supplier. He and other sources interviewed say that discounting of current selling prices has been taking place, in certain markets. One example is the housewares market, where price discounts for PC resins of as much as 6-8% have been reported. While these sources maintain that discounting has not yet taken place within the automotive market, they concede that this is one area where more aggressive pricing is likely.
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Title Annotation:thermoplastics
Author:Sherman, Lilli Manolis
Publication:Plastics Technology
Date:Jan 1, 1990
Previous Article:Troubled waters in third quarter.
Next Article:Recycling ventures keep on coming.

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