07 July 2011 18:59 [Source: ICIS news]
HOUSTON (ICIS)--Prices for polyethylene (PE) and polypropylene (PP) are likely falling because of customers correcting inventory levels - and not because of weaker demand, the CEO of US-based A Schulman said on Thursday.
If demand for polyethylene and polypropylene were truly softening, then the company’s order books would reflect the change, said Joseph Gingo, CEO of A Schulman, a compounder and masterbatch producer.
“But we’re not seeing a drop in our order books," said Gingo, who made his comments during a third-quarter earnings conference call.
Instead, Gingo speculated there may be a correction in inventories taking place.
“Although no real new capacity has come on … but more capacity became available as Asia softened,” he said.
As prices continue to plummet, converters have decided to hold back on buying raw materials. Instead, they decided to use what was already in their inventory and wait for prices to drop further, Gingo said.
“If it is purely a correction, then orders will start coming back in no matter the price,” he said. “If orders start to fall away…then we are faced with a true softening of demand.”
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