Tags continue to weaken
By Staff -- Purchasing, 4/9/1998
Prices for high-density polyethylene (hdpe) will continue to slip as the year progresses. Even suppliers' early spring attempts to raise tags are falling nearly flat due to softening demand and plentiful short-term supply.Contract prices for blow-molding hdpe are between 35(cent)/lb and 42(cent)/lb depending on the grade and volume. Spot tags will stay 2(cent)-3(cent) below contract prices. Despite hikes such as Equistar Chemical's 5(cent)/lb scheduled April 1 increase, contracts will fall about 3(cent)/lb more before stabilizing at year-end.
Buyers will continue to successfully resist hikes. According to a Midwest PM, one supplier recently reduced a 5(cent)/lb hike to 3(cent)/lb to match Solvay Polymer's 3(cent)/lb increase. He suggests that suppliers are trying to raise tags to prevent further price erosion, which has occurred more than once in just the past couple of years.
Raw-material costs also are putting downward pressure on hdpe prices. The Pace Consultants, Houston, Texas, report that hdpe tags don't even reflect the "slippage in ethylene prices" that has occurred in the past six months. Buyers say that ethylene availability is outstripping consumption from hdpe producers.
Demand for this blow-molding resin is soft mostly due to lackluster Asian order rates, which is boosting available supply. Buyers report that hdpe exports are down despite healthy Latin and South American markets. One source notes that barring an explosion, there won't be any shortages this year.
Availability may remain plentiful. Longer term, the Midwest PM forecasts bottlenecks in hdpe production due to new ethylene capacity coming on-stream over the next few years.
Several factors will boost consumption. Environmental concerns have faded in recent years, which will buoy demand for hdpe. One buyer notes that the PCR (post-consumer resin) movement is "stagnating," since PCR is not as cost-effective as hdpe. In addition, a number of communities have discontinued recycling resin containers, the source of PCR.
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