US July PE could drop 2-4 cents/lb on soft feeds, exports

22 July 2010 19:17  [Source: ICIS news]

US PE could drop 2-4 centsHOUSTON (ICIS news)--At least one US polyethylene (PE) producer has lowered prices for July by 2 cents/lb ($44/tonne, €34/tonne), but the market could still slide by an additional two cents, market participants said on Thursday.

PE buyers said domestic resin prices still had room to fall if they were to close the gap with the export market, and feedstock ethane and propane costs had weakened since June, helping to boost ethylene margins.

“I bet they’re trying to jump ahead and keep it from going down four - trying to stop it at two,” a buyer said of July contract negotiations.

The price decreases announced so far had addressed linear low-density PE (LLDPE) and high-density PE (HDPE), sources said.

Low-density PE (LDPE) prices were supported by tight supply, and there was talk of operational issues at another US LDPE plant this week.

Traders said fractional-melt LDPE, in particular, was being sold at a strong premium in export markets. Pricing for bulk exports into Mexico was heard in the mid-to-upper 70s cents/lb, about 30 cents/lb above other grades.

PE export prices were bottoming, and export buyers would begin to take more volume as that reality set in, a US trader said.

To match current export levels on a net basis, US domestic prices needed to drop by about 2 cents/lb, a producer said.

July-October is a period of seasonally strong demand for PE film grades in the US, the source added.

PE buyers were also watching ethylene spot and contract pricing as an indicator for how much resin prices should fall.

June ethylene contracts settled at 39.5 cents/lb, down 16 cents from a 2010 peak of 55.5 cents/lb in March, as reported in ICIS’ ethylene (US Gulf) report.

Domestic prices for LLDPE butene film, by comparison, peaked at 74-77 cents/lb in April and have since dropped by 12 cents/lb to 62-65 cents/lb, as assessed by ICIS.

LLDPE butene export prices fell by 19-20 cents/lb on average during the same time period.

US Gulf LLDPE butene film for export in bags was at 48-50 cents/lb FOB (free on board), sources said.

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

($1 = €0.78)

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