US PE October contracts fall by 5 cents/lb for most

04 November 2011 16:00  [Source: ICIS news]

US PE falls 5 centsHOUSTON (ICIS)--US October contract prices for polyethylene (PE) fell by 5 cents/lb ($110/tonne, €79/tonne) for most of the market, based on weak domestic demand and downward global pressure, sources said on Friday.

While some producers continued to describe their official position as a reduction of 3 cents/lb, they said they had agreed to meet several competitive offers for a 5 cent/lb reduction for all grades.

"If you had to put an across-the-board number on it, it would be three. However, we have met a lot of minus five competitives," a producer said.

Producers said the number of buyers who received a 5 cent/lb reduction varied by grade, with linear low density polyethylene (LLDPE) and low density polyethylene (LDPE) customers seeing the most consistent reduction. High density polyethylene (HDPE) customers saw fewer reductions, some producers said.

Other producers and buyers said all grades had been reduced by 5 cents/lb.

With the reduction, prices for LLDPE butene film were at 66-69 cents/lb DEL (delivered), LDPE film prices were at 75-77 cents/lb DEL and HDPE blow moulding prices were at 64-66 cents/lb DEL, for small volume buyers, as assessed by ICIS.

Following the October price drop, producers have announced plans to raise prices in November by 5 cents/lb, and by an additional 6 cents/lb in December .

Although they agree it is rare for prices to increase in the last two months of the year, producers said the increase is necessary to recover lost margins relating to higher ethane prices.

"Ethane costs are going up, and we really think the market overcorrected with this 5 [cent/lb reduction]," a producer said. "The expectation is that we will see prices come back before the end of the year."

One buyer agreed that a price increase is possible.

"Everybody is saying that their margins have really dropped down," the buyer said. "I'm not super sympathetic, but I think they might get the five."

Other buyers said they weren't sure whether producers would be able to get an increase, adding that the market might go flat.

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

($1 = €0.72)

For more on PE visit ICIS chemical intelligence

By: Michelle Klump
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