Chemicals, plastics tags dipping on lower demand

Staff -- Purchasing, 8/11/2005

Chemicals and plastics buyers this month are reporting price declines, as industry sources say global demand is slipping in mid-2005. Many buyers in Purchasing's latest business survey, agree with survey respondent who opined that "Chemical prices are dropping slightly due to a slowing in Asia." Another says that capacity coming on line in Asia is lowering demand for U.S. exports, which brings domestic prices down.

The chatter on resin prices was particularly high this month. The vice president of a plastics color additives firm said he's seen polyethylene and polypropylene prices drop 6¢ this month.

And a buyer at an automotive fabric supplier said "PVC resin suppliers have given back a penny per month in May and June. And July also looks like it will drop again." He went on to say that solvent-based chemicals like methyl ethyl ketone and xylenes are down in price about 15% this month. Another said monomer prices dropped 2¢/lb.

Dan Smith, CEO of Lyondell Chemical, told an industry meeting recently that buyers have been stockpiling materials like ethylene for months, creating an inventory surplus and a dip in demand. Smith said his company and others continue to push price increases to offset high crude oil tags, but buyers are not accepting many of the industry increases. Andrew Liveris, CEO of Dow Chemical, said in a recent news report that prices remain above 2004 levels, but agreed that buyers are working through an inventory glut right now.

Many chemical and gas producers continue to put out price increases in an attempt to recover material and transportation costs. Air Liquide America said it is increasing prices for argon in both bulk and cylinders by up to 20%. A company statement said, due to the continued increase in diesel fuel prices, the standard delivery charge for both bulk and cylinders will be increased by 10%. According to Kim Denney, president of Air Liquide America, "The cost to source argon has risen considerably, both from a production and a distribution standpoint. As the market tightens and demand begins to surpass supply, long-term commitment for argon purchases will become critical."

CL Industrial Products announced a 25% price increases for bromine and a 30% increase for ethylenedibromide in July.