07 June 2013 10:05 [Source: ICB]
Producers seek a 4 cent/lb increase in June while buyers expect price relief on lower feedstock costs
US May contract negotiations for polyethylene (PE) ended on with a flat settlement, after producers agreed to postpone a proposed 4 cent/lb ($88/tonne, €68/tonne) price increase until June, sources said on 31 May.
As late as 30 May, at least two major producers were still pushing for a 2 cent/lb rise on high density polyethylene (HDPE) grades because of supply constraints caused by two force majeures during the month, sources said.
However, with the rest of the PE market agreeing to a flat settlement for all grades, buyers and suppliers said the remaining two holdouts agreed to a flat settlement.
"We changed our course, because we were having to meet competitives at flat," said one producer. "We are flat across the board for May."
The settlement ended an unusual month, which began with buyers seeking a price decrease, but ended with buyers holding off an increase after Chevron Phillips declared force majeure on PE on 14 May and Formosa Plastics declared force majeure on HDPE high molecular weight bimodal products on 6 May.
Buyers and suppliers agreed that the HDPE market had tightened significantly during the month. However, some buyers were still pressing at the end of the month for a decrease for low density polyethylene (LDPE) and linear low density polyethylene (LLDPE), which buyers said was more available.
The compromise of a flat settlement for all grades pushes further discussions about a possible split between HDPE and film grades into June.
Producers said they are firm on pushing through the full 4 cent/lb increase for all grades in June.
Buyers said they believe June offers some promise of price relief, particularly with expectations that ethylene prices will fall as more crackers come back on line from planned maintenance.
However, some producers said that even with improvement in the ethylene supply, there will be carryover tightness in the PE market as PE producers continue to ramp up production and try to rebuild inventory levels.
Following the May settlement, prices for LLDPE butene film were at 74-76 cents/lb DEL (delivered), LDPE film prices were at 83-85 cents/lb DEL and HDPE blow moulding prices were at 72-74 cents/lb DEL, for small volume buyers, as assessed by ICIS.
Major US PE producers include Chevron Phillips Chemical, LyondellBasell, Dow Chemical, ExxonMobil, Westlake, INEOS, Total, NOVA Chemicals and Formosa Plastics.
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