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Price Hikes Hit Scary Levels

Posted by: Mu Ju 2019-11-13 Comments Off on Price Hikes Hit Scary Levels

The athletes in Beijing aren’t the only ones taking record leaps this summer. PVC producers asked for a startling 8¢/lb increase; PS prices ticked upward at two-week intervals; PP soared by double digits, as did several engineering resins; and LCPs scored a triple-digit climb. In nearly all cases, the cause was not supply or demand, but underlying costs of feedstocks, energy, transportation, and even packaging.

Polyethylene prices moved up 5¢/lb in June, bringing to 11¢ the total increases implemented since January. Last month, suppliers were also intent on getting a 7¢ hike dated July 1 and they posted an 8¢ increase for Aug. 1. The London Metal Exchange (LME) North American short-term futures contract in blown film butene LLDPE also jumped from July’s 73¢ to 79.5¢/lb for August.

Contributing factors: The 7¢ July hike is likely to be implemented in full, as was the June increase, according to Mike Burns, global business director for PE at resin purchasing consultant Resin Technology, Inc. (RTI), Fort Worth, Texas. He notes that June contracts for ethylene monomer rose 5¢ to 70¢/lb. That adds up to 9¢ since January. But bids for July monomer contracts rose another 7¢ to 13¢/lb.

Domestic demand continues to be soft, and industry estimates predict a 2% to 6% decline for the first half of this year. Exports are still taking up much of the slack, but most industry experts look for exports to soften soon.

Polypropylene prices moved up 6¢ to 7¢/lb in June, a partial implementation of that month’s 8¢ hike. For July 1, PP suppliers issued unprecedented price hikes totaling 17¢/lb, 2¢ of which is a surcharge for transportation and utility costs. LME’s August North American short-term futures contract for g-p injection-grade homopolymer soared to 91.2¢ from July’s 78.9¢/lb.

Contributing factors: PP resin tabs have closely tracked rising monomer costs. June propylene contracts moved up 6¢/lb and July contract bids ranged 8¢ to 15¢ higher. “Monomer inventories are low and the market is tight. This will continue until propylene prices are high enough to justify more monomer production,” ventures Scott Newell, director of client services at RTI.

Domestic demand for PP continues to be in a slump, with industry statistics showing a 5% drop through May. While PP export demand started the year above historical highs, it has dropped drastically in the last few months due to the cost of monomer, according to RTI’s Newell. PP plant utilization rates are said to be around 85% or perhaps lower. Suppliers have shuttered older capacity and throttled back production, thereby trimming inventories to 30 to 35 days, from the usual 38 to 40 days.

PET prices moved up 8¢ to 10¢/lb by the end of June, reflecting partial implementation of price hikes for April, May, and June totaling 12¢/lb. Meanwhile, suppliers were aiming to implement a 7¢ increase for July 1.

Contributing factors: Feedstocks were up 13¢ between March and April alone, and energy and transportation costs for PET producers rose 1.5¢ to 3¢, according to one leading supplier. Price of paraxylene precursor, at 58.25¢/lb in March, was headed to 71.5¢ for June. Projections for July contracts were around 78¢/lb. Said one supplier, “We are trying to explain to our customers that these are unprecedented times and that this surge in feedstock, energy, and transportation costs is here for the long run.”

All PVC resin producers added 4¢ to previously announced 4¢ hikes for July 1, adding up to a record-high 8¢/lb price increase, at least half of which is expected to stick. Spot prices are already up 8¢. This follows a 4¢ increase in May and June.

Contributing factors: Ethylene monomer contract prices for June still had not settled in mid-July, but producers said there would be an increase of 5¢ to 15¢/lb. PVC demand through May was down 12.7%; pipe resin dropped 20.7%; and consumption in windows was off 6.5%.

The three big PS producers, Total, Ineos, and Americas Styrenics, announced staggered price increases of 12¢ to 14¢/lb for crystal and HIPS between mid-June and Aug. 1. Although their schedules varied, all three suppliers ended up raising prices at two-week intervals. What’s more, the spread between crystal widened to an unaccustomed gap of 4¢/lb.

Contributing factors: PS demand is fairly good, especially in packaging. But HIPS supply will stay very tight for at least the next two months because the rubber ingredient is on allocation.

BASF’s Styrolux and Styroclear SBC resins went up 6¢/lb on July 7 after rising a similar amount in June.

Bayer MaterialScience lifted tabs on PC and PC/ABS grades by around 10¢ to 15¢/lb in mid-June.

DSM raised injection molding and specialty grades of nylon 6 and 66 by 20¢/lb last month, while extrusion grades rose only 12¢.

Lubrizol hiked Estane and other aromatic TPUs by 21¢/lb July 15, but Tecoflex aliphatics went up 15¢.

Ticona’s Vectra A LCPs cost $1.60/lb more on Aug. 1. All other Vectra grades rose $1.15/lb.

Unsaturated polyesters, vinyl esters, and gel coats from Reichhold, CCP, and AOC cost 8¢/lb more this month. AOC added 2¢ and CCP 4¢ more to drum shipments because of the rising cost of steel.

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