US PE prices face downward pressure longer supply - Arhive

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US PE prices face some downward pressure in H2 on longer supply   US PE prices face downward pressure longer supply

 Source:ICIS News

HOUSTON (ICIS)–The US polyethylene (PE) market may come under pressure in the second half of the year because of longer supply, after prices remained at higher-than-expected levels.US PE prices face downward pressure longer supply

US PE prices face downward pressure longer supply

Participants had expected the 10 cent/lb ($220/tonne) increases in the months immediately following Hurricane Harvey to recede in early 2018.

However, most of the post-Harvey price increases remain in place, as new PE plants have yet to reach full operating rates. Supply was also tight in the first quarter as severe winter weather along the US Gulf disrupted production at several PE plants.

US PE prices face downward pressure longer supply
PE is used to make bags. (Photo credit: Dinendra Haria/REX/Shutterstock)

Supply tightness lingers for several grades of high density polyethylene (HDPE) and low density polyethylene (LDPE), while availability of linear low density polyethylene (LLDPE) is sufficient.

PE prices remaining at elevated levels has created some financial difficulties for converters, many of whom are experiencing margin compression as they had budgeted for lower PE input costs.

In addition to lengthening supply, buyers also point to weaker feedstock costs as support for hopes of price relief in the PE market. US PE prices face downward pressure longer supply

Spot prices for feedstock ethylene fell to multi-year lows during the first half of the year, partly because of new ethylene production coming online and raising operating rates at a faster rate than new PE plants.

Overseas demand has also been sluggish due a stronger dollar, as well as contentious elections in some major export destinations.US PE prices face downward pressure longer supply

The US typically exports around 20% of its PE production. This percentage is expected to increase in the coming years, as most of the new US capacity is intended to supply overseas demand.US PE prices face downward pressure longer supply

Trade tensions between the US and China have also crimped overseas demand, with some Chinese buyers seeking to exchange LDPE for other grades not subject to proposed tariffs on US PE exports in China.US PE prices face downward pressure longer supply

China’s proposed tariffs would include LDPE and some grades of LLDPE, while HDPE was exempted from Chinese tariff proposals.

Major US producers of PE include Chevron Phillips Chemical (CP Chem), DowDuPont, LyondellBasell, ExxonMobil, Formosa, INEOS, Total Petrochemicals and Westlake.

Focus article by Zachary Moore

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