US PE prices climb 7 cents/lb in July - buyers

18 July 2008 18:35  [Source: ICIS news]

HOUSTON (ICIS news)--US July polyethylene (PE) prices were firmly established at 7 cents/lb ($154/tonne, €97/tonne) above June levels, but the increases could crumble if crude oil prices continue to moderate, buyers said on Friday.

“We saw higher prices coming so we stocked up,” one source said.

Other buyers expressed similar sentiment, saying that increases appeared inevitable early in July, unlike in previous months, when buyers and sellers were negotiating price hikes up to the last minute.

Even secondary marketers and exporters were not finding PE priced without the full 7 cent/lb increase, sources said.

Some traders were seeking PE for export at prices that included part of the proposed 8 cent/lb increase for August, a producer said.

Producers took a firm stance on the 7 cent/lb July increases as their costs rose dramatically on the back of a rapid run up in ethane prices and new crude oil records seen during the first half of the month.

Falling inventories throughout the PE market have also supported the increases, according to sellers.

A PE producer cited American Chemistry Council (ACC) data showing US inventories declining by 600m lb (272,000 tonnes), or about 20%, since the beginning of 2008.

The moderation of crude oil prices seen earlier this week was likely to create more resistance to producers’ 8 cent/lb price hike proposals for August, buyers said.

Market participants also noted this week that export volumes from the US appear to be declining in July, which could reverse the trend of falling inventories.

“Export is the real safety valve for producers,” a PE buyer said.

Another buyer said more material was cropping up in secondary channels during July, although not as much as was seen during the first quarter.

Prior to the 7 cent/lb July increase, US low density polyethylene (LDPE) prices were 88-92 cents/lb DEL (delivered), according to data from global chemical market intelligence service ICIS pricing.

Major US PE producers include Dow Chemical, Formosa, ExxonMobil and Equistar.

($1 = €0.63)

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By: David Barry
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