Buyers of chemicals packaging, shipping and handling containers and services can expect to see pricing drop in the next few months, as the bulk packaging industry feels the effects of slower demand for most chemicals, falling feedstock and energy costs, and an abundance of supply.

It's good news for buyers, but, for producers, current economic conditions—coupled with the challenge of razor thin profit margins—are anything but good. Most are hoping against hope that the current pricing situation is just part of the chemical industry's natural business cycle, and that they can hold tags steady for as long as possible until conditions improve.

Here's a look at both current and projected market conditions for major types of bulk packaging containers—

• Drums. Product managers in the fibre drum and box container market have seen prices erode in recent months. Paperboard prices slid through first half 2001, from about $455/ton in January to about $410/ton in late summer. Corrugating medium prices fell from $420/ton early in the year to about $380 at summer's end.
  With fairly transparent pricing in this mostly disposable packaging container segment, it has been difficult for fibre packaging producers to hold product pricing steady, and most are seeing prices start to slip. Some fibre drum companies, however, announced more moderate price increases when paperboard and energy costs were high, in order to remove some of the volatility in price swings.
  Pricing for 55-gallon steel drums, standard in the chemical shipping market, has remained fairly stable, according to a marketing manager at National Packaging Services Inc., a bulk packaging container and services distributor based in Hackensack, N.J. The marketing manager says that as the price of cold rolled steel continues to slide, buyers should see steel drum prices soften by about 1%-2% over the next three to six months.
  "Where we typically see 6% annual demand growth, this year, we'll likely see 4% growth," says the marketing manager.
  For much of this year, producers in the plastic drum market have been working hard to keep container prices firm. And overall, the price outlook for plastic drums is flat for the next six months. "Compared to annual averages, we haven't seen prices eroding as much as people would think," says a VP of marketing at a major domestic plastic container producer. "In fact, pricing for most polyethylene resins appears to have rallied in the last month, so we believe we may have seen the bottom of the cycle for feedstocks," he says.
  While the plastic drum market is seeing some demand softening due both to seasonal issues and to the fact that chemicals shipments are lower than expected, the VP expects to see some pickup in coming months. In addition, the exec expects some feedstock supply tightening in the next few months from production curtailments, which should help keep container prices firm.
  According to Purchasing's monthly survey data, prices for blow-molding grad high-density polyethylene (HDPE) surged from 45¢/lb in December 2000 to 53¢/lb in January as natural gas and crude oil prices rose rapidly. But high prices were short lived. Blow-molding grade HDPE slid to 47¢/lb in March, then to 45¢/lb in May. As energy prices continued to soften and the economic slowdown took hold of the chemicals market, the resin grade fell to 43¢/lb in July and August.
  In recent weeks, producers have announced price hikes for most ethylene derivatives, and buyers expect pricing to begin to inch upward. If feedstock HDPE prices continue to move upward, plastic drum prices will likely remain flat.
• Intermediate bulk containers. Most suppliers are forecasting a flat-to-down pricing trend for the year ahead despite demand growth of 5% for rigid IBCs. Sliding feedstock costs are the primary cause, but capacity is also growing rapidly and is set to expand on the order of 7%-8% in the coming year. Buyers can expect to see rigid IBC pricing fall as much as 5% by mid-2002.
  Though stainless steel IBC tags top the cost of all other bulk shipping and handling container options, buyers face a bright cost outlook for the coming year. Stainless steel sheet pricing fell considerably in first half 2001, so it follows that container prices will decline also once the typical six- to nine-month lag time is elapsed. Producers will continue to add value to their product offerings, in the form of container pickup, management and reconditioning services to keep prices and profit margins up. However, with capacity utilization and chemical shipments near all-time lows, container manufacturers will be selling products in a highly competitive market through second quarter of next year. Prudent buyers should be able to negotiate relatively low container contract prices with quality services to boot.
• Bulk bags and totes. Pricing in the bulk bag and tote market has been fairly stable in the past year, due to two factors. On one hand, producers are experiencing intensified price competition from low-cost, overseas producers. But, high crude oil feedstock pricing has applied upward pressure on polypropylene. The year ahead promises more of the same, with stable pricing or possibly price erosion on the order of 1% to 2%.