Price and market trends: US August PE contracts end flat, producers eye future increase

06 September 2013 09:54  [Source: ICB]

For September, producers nominate increases around 5 cents/lb for all grades, with Total seeking as much as 7 cents/lb

US August contract negotiations for polyethylene (PE) ended in a rollover after the biggest producers separately agreed to give up on proposed increases for all grades and to settle flat, leaving on the table only proposed increases for next month, sources said on 29 August.

Up until the end of the previous week, most producers had been separately telling buyers that they planned increases for September on an average of 5 cents/lb, with the possibility of part the increase or even an additional amount, added to their August billing.

 Producers seek price increases in September

Copyright: Rex Features

However, early in the week, market sources reported hearing from their biggest suppliers that all proposed increases on all grades will not go in effect until after 1 September, leaving August prices unchanged.

By Thursday, all producers had followed suit, sources said.

"With the biggest producers agreeing to go flat, it would have been difficult for any of the smaller ones to keep pushing any August increase in any grade," one buyer said.

The flat settlement for August means that the 2 cents/lb ($44/tonne, € 33/tonne) margin bump HDPE producers implemented in June when other PE grades settled flat continues.

For September, most producers have nominated price increases of an average of 5 cents/lb for all grades with Total seeking as much as 7 cents/lb.

"They will never get the 5 cents/lb. Lucky if they do not go down," one source from the buying side said.

The source added that producers have not had success in other recent price increase nominations. Other buying side sources said neither feedstock values nor demand justify increases and that unless there is a hurricane hitting the US gulf coast, prices may not experience changes in September.

At least two sources from the buying side said that there will not be any impact in September from an allocation announced on 28 August to its customers by ExxonMobil on HDPE, following an expected outage of one pipeline carrying ethylene to its Baton Rouge plant in Louisiana.

The allocation means that there will be reduced supply from the plant.

That plant, with a 900,000 tonne/year capacity as described by sources, is ExxonMobil's biggest HDPE plant in the US.

After the August 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 74-76 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.

ExxonMobil to allocate HDPE from US plant after pipeline outage
ExxonMobil will allocate high density polyethylene (HDPE) from its Baton Rouge Polyolefins Plant because of an unplanned outage of a pipeline, a market source said on 29 August.

The allocation, which means that buyers are likely to receive less product than ordered, will occur "as a result of an unplanned outage on a third party pipeline impacting ethylene supply" to the plant, according to a copy of an ExxonMobil letter, obtained by ICIS.

"ExxonMobil Chemical very much regrets the impact that this supply disruption may have on your business," the company added. ExxonMobil has the capacity to produce 900,000 tonnes/year of HDPE at its Baton Rouge plant, according to market sources. It is the second-biggest HDPE plant in the US.

The allocation comes amid market talk for a likely flat settlement for August contract discussions, as most producers had, in recent days, moved increases for all grades of PE at an average 5 cent/lb ($110/tonne, €83/tonne) to September.

A market source said with the allocation there could be stronger pressure for an increase of the HDPE grade. ExxonMobil has a second HDPE plant in the US, in Mont Belvieu, Texas, with a 240,000 tonne/year capacity, sources said.

By: Renzo Pipoli
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