US ExxonMobil puts HDPE customers on allocation

25 October 2011 20:02  [Source: ICIS news]

HOUSTON (ICIS)--US polyethylene (PE) producer ExxonMobil told customers it would begin allocating sales of its high molecular weight high density polyethylene (HDPE) products produced at its Mont Belvieu plastics plant in Texas, sources said on Tuesday.

The customer allocation is a result of "unexpected operational difficulties" according to a copy of a customer letter obtained by ICIS.

"We are currently assessing the full impact to our polyethylene supply capability, but have determined it is necessary to allocate quantities of product," the letter states. "The quantity of each product that will be allocated to you is still being determined and will be communicated to you as soon as possible."

It was not clear what caused the operational difficulties. A company spokesman did not immediately respond to a request for comment.

Without knowing the duration of the outage, sources said it is difficult to estimate how the allocation will affect ongoing October contract negotiations.

Buyers have suggested October contract prices should fall by 5 cents/lb ($110/tonne, €79/tonne), based on long supply and a widening spread between domestic and export prices. However, producers have said they are standing firm on a reduction of 3 cents/lb for the month.

One source said the ExxonMobil problems would "make it tough" for buyers to see more than a 3 cent/lb drop.

ExxonMobil has a 240,000 tonne/year capacity HDPE unit at its Mont Belvieu facility, according to ICIS plants and projects.

($1 = €0.72)

By: Michelle Klump
+1 713 525 2653

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