By Malini Hariharan
After Europe, the US polyethylene (PE) market has started showing increasing signs of weakness. Spot offers have rapidly fallen putting downward pressure on June contracts that are currently under negotiation. Producers may have no choice but to settle at lower levels as exports to Asia is no longer a viable option.
Spot offers for some PE grades in the US are nearly 19% below May contract prices, reports ICIS news.
According to one buyer, a producer has nominated a 6 cent/lb reduction in low-density polyethylene (LDPE) June contract price and 3 cent/lb drop in linear-low density polyethylene (LLDPE) and high-density polyethylene (HDPE) prices. But even this is likely to be unacceptable to buyers.
Contract prices in May were rolled over from April with LLDPE at 77-81 cents/lb as against current spot offers of 63-65 cents/lb.
With crude oil prices falling last week after the IEA’s decision to release 60m bbls of oil from strategic reserves and US ethylene for July dropping 11%, PE buyers will be looking for to maximise price reductions. The outlook for US ethylene also remains soft with supply set to increase once LyondellBasell restarts a cracker in Texas after a 2-month maintenance shutdown.
Meanwhile competitive exports from Asia have reached as far as Mexico, another blow to US producers. Pemex, the Mexican producer, has been forced to implement two price reductions for LDPE and LLDPE in June in response to lower priced Asian offers.
And with Chinese buying continuing to remain weak for reasons highlighted by the blog in earlier posts, exports to the West are likely to be a steady feature in the coming weeks.