2016 has been a fairly stable year for PVC pipe prices. There are some signs of a possible increase to CPVC, which hasn’t seen an increase since 2014. There have been moderate increases on PVC base resin prices this year, around $0.07/lb. or 20%. However, the lack of robust demand has not allowed these increases to translate into large increases in pipe prices. A PVC base resin increase of around $0.02/lb. should translate to around a 4% increase in price. That is about the change that occurred in 3Q16.  As construction season draws to an end, the possibility of the acceptance of another increase in the market appears unlikely, and traditionally, prices tend to drop during the fourth quarter. Although base resin prices seem to warrant an increase, general demand for PVC makes the increase less likely heading into 1Q17. Although increases in oil and natural gas prices could drive resin prices higher, increased pipe prices seem unlikely before 2Q17.



It has been a slow year for HDPE producers, in large part because two of their standard markets they depend on have been in recovery mode. HDPE, mainly used in water transfer for the oil and gas business, has hit a wall with stagnantly low prices and a supply glut to boot. The other market, coal, has been reeling with its own set of problems, namely an abundance of cheap natural gas and strangling government regulations. Both these market segments have pushed HDPE manufacturers into defensive positions trying to hold on to what market share they have left and maintain margins up to sustainable levels. Pressure pipe has been especially under siege because all the producers are chasing the same projects. One major producer has completely dropped out of the game until steady demand can push margins back into profitability. Currently, there are no signs of a rebound this quarter or likely next year.

Overall, pricing for the year has been relatively stable. Distributors have enjoyed some stability when buying inventory without fear of major swings. However, a significant increase came in 3Q16 giving some producers a short burst of relief, but it will be short lived. Producers across the country are running at about 70% capacity and have shuttered some of their same lines that had four- to six-week backlogs this time last year. A portion of the price increase that went into effect in October has already been rescinded with a temporary value adjustment. One industry insider expects the balance of the increase to be given back incrementally throughout the remainder of 2016.

Five years ago, resin producers were forecasting an endless supply of natural gas business. Therefore, many of the top producers added tremendous production capacity to their plants, not knowing an energy sector collapse was coming. Since planning, engineering, financing and construction of this magnitude take years to implement, it was too late to turn back. Now, an additional billion pounds of resin capacity is coming online and all domestic resin producers are jockeying for position. Only 10% of this new resin is pipe grade, but that is more than enough to choke resin manufacturers in a down market. Some of this overcapacity will likely be exported in the first half of 2017.

One bright spot for HDPE could be domestic infrastructure. The water crisis in Flint, Mich., has presented the opportunity for widespread use of HDPE in potable water applications. The advantageous qualities of HDPE are that it is contaminant-free (no lead), and since it is fused together, it is virtually leak-free.  Should governments decide to go forward with infrastructure spending with an emphasis on clean water, HDPE will likely be the big winner.