HOUSTON (ICIS)--Buyers’ hopes for an April price drop in the US polyethylene (PE) market faded with the end of the month, with contract prices settling flat for the second month in a row, sources said on Wednesday.
With the rollover, prices for linear low density PE (LLDPE) butane film were at 83-85 cents/lb ($1,830-1,874/tonne) DEL (delivered), low density PE (LDPE) film prices were at 92-94 cents/lb DEL and high density PE (HDPE) blow moulding prices were at 83-85 cents/lb DEL, for small volume buyers, as assessed by ICIS.
Buyers had hoped that April would bring the first price drop since November 2012, arguing that lower feedstock costs, improved supply conditions, weak export demand and slightly larger producer inventories were enough to cause producers to offer some price relief.
However, a few lingering issues in the upstream ethylene market, including the ongoing outage of the Evangeline pipeline as well as some cracker turnarounds, appeared to be enough to allow producers to maintain pricing.
“I think it was more wishful thinking than anything,” said one buyer, referring to hopes that prices would fall in April. “You didn’t have the ethylene pipeline back on line, you didn’t have the Williams [cracker] on line. The only thing supporting it was the decrease in exports.”
However, that buyer and others said they expect the situation to change in May or June, with the Evangeline pipeline expected to return to operation, as well as a PE supply situation that continues to improve.
“I do see prices coming down – we have reached a peak here,” said one buyer. “It may have been premature to weaken in April, but I think it will come more into play in May and definitely June.”
Other market participants said a price decrease could be put in jeopardy if demand improves in the export market.
For much of April, US prices were too high to compete with global prices. But in recent weeks, as China’s appetite has improved, Asian prices have started to rise. If those prices rise enough, US material will again be competitive, which would offer US producers the relief valve of the export market to rid themselves of growing inventories, sources said.
“The overseas prices have crept up a little bit,” said one trader. “If exports pick back up, I just don’t see any reason why they couldn’t keep prices flat.”
Major North American PE producers include Chevron Phillips Chemical, LyondellBasell, Dow Chemical, ExxonMobil, Westlake, INEOS, Total, NOVA Chemicals and Formosa Plastics.