US September PE contracts for all grades increase 5 cents/lb

01 October 2013 17:54  [Source: ICIS news]

HOUSTON (ICIS)--Prices for US polyethylene (PE) went up across all grades for September contracts by 5 cents/lb ($110/tonne, €81/tonne) because strong seasonal demand met several supply disruptions, particularly affecting high density polyethylene (HDPE) availability, market sources said on Tuesday.

It was the first time producers were successful in implementing a contract price increase since June, when PE contract price increases were limited to a 2 cents/lb rise just for HDPE grades.

Nominations for increases in all grades, including low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) had existed for the previous months but could not be implemented.

However, in September, there were two force majeure declarations on HDPE production affecting LyondellBasell plant in Matagorda, Texas, and Formosa’s HDPE plant in Point Comfort, Texas.

The two force majeures were announced as ExxonMobil was having pipeline problems to move ethylene to its biggest HDPE plant in Baton Rouge since late August, when it declared a product allocation.

“Supply is really only tight on the HDPE. I have not had any problems in getting LDPE or LLDPE yet somehow the producers were able to successfully drag the LDPE and the LLDPE into the 5 cent/lb price increase,” one source said. 

LyondellBasell said around 12 September that its HDPE plant in Matagorda, estimated by ICIS to have 695,000 tonnes/year capacity, was facing mechanical difficulties that were serious enough to justify a force majeure. 

Five days later, Formosa Plastics declared force majeure on HDPE products from its 650,000 tonnes/year plant in Point Comfort, Texas, following what it described as an “incident” that sent five people to the hospital.

ExxonMobil’s ethylene pipeline problems at its biggest HDPE plant in Baton Rouge, which has a 900,000/tonne capacity, were originally disclosed in late August, and according to at least two sources, the allocation continues as of 1 October with the company putting pressure for early buying forecasts.

HDPE supply became so tight in the second half of September that there was little or no product being available to offer for export, sources said.

Looking into October at least two producers, Dow and INEOS, are seeking additional increases of 5 cents/lb for all PE grades, sources have said. The increases are based on strong demand and ongoing inventory tightness.

However, prices may just stay flat in October as none of the other PE producers, such as CPChem, ExxonMobil, Westlake, Total  and Nova have sought any increase.

“Typically they would send price increase nominations a month ahead and there have been no other notices,” one source said.

Dow and INEOS may end just rolling over prices in October as they may eventually seek to match such a proposals by competitors to avoid being underpriced, it added.

Dow may have already decided to postpone the October announced increase to November, one market source said on Tuesday, but the information could not be immediately confirmed.

The September price increase occurred at a time of very strong seasonal demand as converters increase production to prepare for the Christmas holiday season, one source said.

The strong demand which is expected to continue in October, may help producers keep the September gain though it is unlikely they will see another increase, one source said.

Plant situations are expected to improve, sources added.

Following the September settlement, prices of LLDPE butane film were at 79-81/lb DEL (delivered), LDPE film prices were at 88-90/lb DEL and HDPE blow moulding prices were at 79-81 cents/lb DEL for small volume buyers, as assessed by ICIS.

($1 = €0.74)

By: Renzo Pipoli
+1 713 525 2653

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