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Prices rise for PP and suspension PVC

July 31/2009
July 30 (AKRON, OHIO) -- North American prices for polypropylene and suspension PVC have continued to climb as the summer of 2009 rolls on.

Suspension PVC prices have jumped another 4 cents per pound on average since June 1, while PP prices have ticked up an average of 1 cent per pound since July 1. Both moves are tied in to feedstock issues, since demand for both materials remains low when compared to historical averages.

High prices for chlorine feedstock were brought about by low prices for caustic soda, a by-product of PVC production.
The resulting costs were passed along to buyers of PVC, which uses both chlorine and ethylene as feedstocks.

The recent pricing move was split between a penny in June and three in July. Some buyers may have seen a different amount in June, depending on what type of increase they saw in May. The total PVC price increase for May-June was 3 cents, according to several buyers contacted recently by Plastics News.

The increase attempts have received no help whatsoever from U.S./Canadian PVC demand, which continues to be weak as the economy — including the PVC-heavy construction field — continues to struggle. Regional PVC demand through April was down almost 14 percent, according to the American Chemistry Council in Arlington, Va. Taking out the export market — where sales jumped 23 percent in response to gaps in regional pricing — left North America with a 20 percent drop in domestic PVC demand.

U.S. housing data is improving somewhat, but remains well below past totals. Housing starts increased almost 4 percent from May to June, according to the national Association of Home Builders in Washington, but the seasonally adjusted rate of 582,000 was 46 percent below the same month in 2008. The 2008 total of 906,000 housing starts represented a drop of 33 percent from the prior year, and the 2009 total may be lower still.

That’s a big deal for PVC, which in the first four months of 2009 generated almost 66 percent of its domestic sales from the construction market, according to ACC. One industry contact estimated that current operating rates for North American PVC are in “the low 80s.” That number is low by historical standards, but would be worse if Georgia Gulf had not shut down almost 1 billion pounds of total capacity at sites in Oklahoma and Ontario in the last year. OxyVinyls also closed a smaller PVC plant in Lousiville, Ky., earlier this year.

With the latest increase, regional PVC prices are up an average of 8 cents per pound since Jan. 1, after plummeting 19 cents per pound between September and December last year. PVC makers now are seeking increases of 2 cents per pound for Aug. 1.

In PP , the 1-cent increase since July 1 was the latest in a series of hikes tied in to the price of propylene monomer feedstock. But it’s only a small portion of the 6 cents that producers had been seeking for the month. One industry source said that as the summer driving season winds down, less propylene has been sold into the gasoline market, where it is used as a fuel additive. As a result, more propylene has been available for PP production.

That would be all well and good if regional PP demand was strong, but that is not the case. Through April, North American demand was down almost 10 percent vs. the same period in 2008, according to ACC. As in PVC, subtracting a strong export market — with a stunning 66 percent growth rate — makes the domestic market look even worse, with a loss of almost 17 percent. As a result, regional PP operating rates are estimated to be at only 80 percent.

Price swings on PP have been even more drastic than in PVC. With the added penny in June, regional prices now have climbed an average of 22 cents per pound since Jan. 1. That has allowed the market to recapture about one-third of the 65 cents in pricing that suppliers lost between September and December last year. 

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