Prices could deteriorate from capacity additions
By Staff -- Purchasing, 1/13/2000
Amid strong demand, rising feedstock prices, and a number of unplanned outages at raw materials facilities, pricing for most polymer resins made significant gains in 1999.PURCHASING's price index for polymer resins--based on monthly pricing data submitted by buyers of high-density polyethylene (HDPE), low-density polyethylene (LDPE), linear low-density polyethylene (LLDPE), polypropylene (PP), polystyrene (PS), and polyvinyl chloride (PVC)--rose dramatically in second-half 1999 as prices increased for most of the component resins. After hovering at about 63 points through most of first and second quarter 1999, the index jumped to more than 74 points in third quarter.
The biggest gains among polymer resins, according to buyers' data, were in PVC and HDPE. The index for PVC made a sizeable jump of almost 12 points in 1999, from 10.3 to 22.0. The HDPE index increased more than five points in 1999, from 13.9 to 19.0 by the end of fourth quarter.
But while producers were able to win resin price increases in 1999, some industry insiders see prices softening in 2000, as additional capacity enters the market. Industry observers at Donaldson, Lufkin & Jenrette Securities Corp. in New York say prices and profits are likely to deteriorate as more ethylene and polyethylene capacity comes on-stream in 2000.
PURCHASING's data agrees with this assumption. According to buyer forecasts, the polymers index will slip from 89.8 in fourth quarter 1999 to 82.1 points in second quarter 2000. In second half 2000, buyers expect prices to fall further, bringing the index down to around 76.2 points in the fourth quarter.
In supply news, The Dow Chemical Co., Midland, Mich., is planning to build a $2.5 billion petrochemical plant in the Chinese city of Tianjin, according to a company press release. Dow will begin building with Chinese JV partner Sinopec after final government and regulatory approvals. When completed, sometime in 2005, Dow's petrochemical plant will include a 600,000-tonne ethylene cracker for production of polyethylene, styrene monomer, polystyrene, latex and epoxy.
In other news, Equistar Chemicals, LP, Houston, Texas, will shut down four polymer reactors at La Porte, Texas, by the end of February 2000, as part of the company's long-term asset optimization and utilization strategy. The units include two high-density polyethylene (HDPE) reactors with a combined capacity of 300 million lb/yr and two low-density polyethylene (LDPE) reactors with a combined capacity of 60 million pounds per year. The company recently completed HDPE expansions, adding more than 600 million pounds of HDPE to the marketplace. In October 1999, Equistar started up its 480 million lb/yr HDPE unit at its Matagorda facility located in Bay City, Texas. A 120 million lb debottleneck at the company's facility in Victoria, Texas, went into service in late 1998.
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