PE buyers see US price hikes piling up

19 June 2009 17:51  [Source: ICIS news]

PE producers seek price hikesHOUSTON (ICIS news)--US polyethylene (PE) producers announced they will seek an additional 8 cents/lb ($176/tonne, €127/tonne) in July, following price hike initiatives totalling 6 cents/lb in May and June, buyers said on Friday.

“The June 3-cent increase is looking solid right now,” a buyer said, citing higher PE production costs due to rising ethane and ethylene values.

Spot ethylene for July traded at 27 cents/lb earlier this week, compared with May and June deals heard at 22.25 cents/lb a month earlier.

However, ethylene was offered on Thursday at 26.25 cents/lb, a drop from previous deals.

The question was how much, if any, of the 8-cent July PE increase could be implemented, the buyer said.

“They’re rolling the dice on a force majeure incident now that hurricane season is here. It’s just incredible,” the source said. So far there have been no hurricanes this year.

Other buyers agreed that producers would have little difficulty making the 3-cent/lb June increase hold.

However, sources predicted a big fight in July, especially given the magnitude of the increases sought by producers.

Participants said they would be watching for any signs of weakening in export volumes due to the emergence of new capacity in the Middle East and China.

US PE producers have leaned heavily on exports this year, aided by the cost advantage of natural gas liquids - the most common ethylene feedstock in the US Gulf industry - over naphtha.

A trader said one US producer has exported around 40% of its production this year.

With the 3-cent June increase pending, US high density PE (HDPE) blow moulding resin was at 49-52 cents/lb DEL (delivered) for small-volume customers during the week ended 12 June, according to global chemical market intelligence service ICIS pricing.

Major US PE producers include Chevron Phillips, LyondellBasell, Dow Chemical, ExxonMobil, Westlake, INEOS, Total and Formosa.

($1 = €0.72)

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By: David Barry
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