US Polyethylene prices battled their way up again in July

Polyethylene prices battled their way up again in July, while PVC makers pushed a July increase back into August. And sky-high prices for benzene feedstocks have lifted tabs for ABS, styrene acrylonitrile and styrenic copolymers as well, according to several sources contacted recently.

The PE move accompanied strong demand and continued pressure from high prices for natural gas and crude oil. Natural gas — a starting point for production of about 70 percent of North American PE — was trading Aug. 11 at $5.80 per million Btu. That price is about 12 percent higher than the year-ago level. Crude set records by breaking the $45 per-barrel mark recently, an increase of about 50 percent from 2003.

The PE increase took hold even though U.S. natural gas supplies are running 9 percent ahead of where they were at this point in 2003, according to the Department of Energy.

Recent increases in resin pricing in Asia also have created opportunities for North American PE makers to sell into that market, further tightening North American supply, industry sources said. “The opportunity to [sell] into Asia is there,” one North American PE executive said. “[North American PE] is a good value right now.”

Core domestic PE demand in the United States and Canada also was strong through June, with high density PE sales up 9 percent, linear low up 6 percent and low density PE up 4 percent, according to the American Plastics Council in Arlington, Va.

An Ohio-based PE buyer said his firm had its best July sales since before the Sept. 11, 2001, terrorist attacks, but he added that prices for natural gas and petrochemicals “are out of control.”

“We’re having a great year volumewise, but our margins haven’t improved that much,” the buyer said. “We’re in a different time than we’ve ever seen before.” The 4 cent move now has North American PE prices up 10 cents on the year. Another 5 cent move is on the table for Sept. 1.

“I’m not saying we’re happy with our margins,” the PE executive said. “But supply/demand fundamentals are kicking in, so our margins should be better in 2005.”

The PVC delay surprised some producers and even some buyers, who believed solid construction activity would allow the move to take hold. Instead, PVC makers now are seeking a 1 cent-per-pound hike in August and 1-2 cents per pound in September. To date, PVC prices are up an average of 9 cents per pound in 2004.

Barry Hendrix, a vice president with leading PVC maker Oxy Vinyls LP of Dallas, added that opportunities also exist for North American PVC producers to sell into Asia. That situation could continue through the end of the year, placing the North American PVC market at “a low inventory point” to start 2005, Hendrix said.

A number of buyers cited slow PVC pipe activity in July, as distributors and suppliers shed inventory they had built up in previous months. “There’s no volume in the pipe market right now,” a Midwest-based PVC buyer said. “Distributors bought tons of inventory between March and May, and now they’re running that inventory down.”

Sales of new single-family homes in the United States hit the 1.3 million annual rate in May and June, setting a record for that two-month period, according to the National Association of Home Builders, a Washington-based trade group.

NAHB chief economist David Sieders said in a July 27 news release that expectations of higher interest rates later this year might have spurred some construction. “While home buying may fade later this year, it now appears that home sales for 2004 will easily surpass the record set last year,” he said.

Through June, construction-related uses accounted for almost two-thirds of domestic PVC consumption in the United States and Canada, according to APC. Overall domestic PVC sales were up more than 8 percent in that period.

The styrenics move results from record-high benzene feedstock prices, which have lifted prices of styrene monomer and now are having a similar effect on prices for ABS, SAN and styrenic block coploymers, according to industry sources.

July contract prices for benzene were just above $3 per gallon, while spot prices around $4 also were reported. By comparison, the material never topped the $1.50 mark between 2001 and 2003.

As a result, selling prices for commodity-grade ABS are up an average of 10 percent since the start of the year. On injection molding-grade ABS, that works out to about 7 cents per pound, based on the Plastics News resin pricing chart. SAN prices likewise are up 10 percent, or about 10 cents per pound, according to industry sources. Identical jumps have been reported in prices for styrenic block copolymers.

North American ABS sales were up more than 6 percent through June, while SAN sales in the region had surged by more than 14 percent, according to APC. The building/construction end market drove sales of ABS, SAN and other styrenics in the first five months of the year. APC reported sales into that segment were up more than 37 percent, accounting for 20 percent of all domestic sales.