US August PE prices roll over as producers seek Sept. increase

27 August 2014 22:28 Source:ICIS News

Focus story by Michelle Klump

HOUSTON (ICIS)--While August prices in the US polyethylene (PE) market settled flat for the sixth month in a row, higher spot prices and tight supply are lending support to a September price hike, sources said on Wednesday.

With the rollover, prices for linear low density PE (LLDPE) butene 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.

Ongoing production issues in the upstream ethylene market have put limits on some downstream PE production, with HDPE grades considered among the tightest, sources said.

Chevron Phillips Chemical remains on force majeure for PE, based on an ongoing force majeure at its upstream ethylene plant in Port Arthur, Texas. There has been no official word on when that plant will restart, but sources said they have heard it will remain down into the fourth quarter.

Also, early in the month, Dow Chemical experienced a feedstock outage that affected PE operations in Canada. Sources said that situation, which is affecting certain grades of LLDPE and HDPE, is ongoing, and contributing to tight supply.

Most buyers said they have had no trouble obtaining their forecasted contract volumes, but agreed that any extra spot material is very hard to obtain. Most spot material is carrying as much as a 5-8 cent/lb premium over contract prices, buyers said.

“We are in a bit of a growth spurt and needing a little excess and can’t get it,” said one buyer.

Another buyer who is under allocation by Chevron Phillips and is therefore not getting even its forecasted volumes, agreed it has been difficult finding enough extra resin on the spot market to meet its needs for the month.

“It is a little bit problematic,” the buyer said. “I can deal with it for a month or two, but any longer … it is going to hurt a little bit.”

The current tight supply situation is making a September price hike increasingly likely, sources said. All producers have announced separate increases of between 3-4 cents/lb for the month, and sources said that if current spot prices are any indication, they will get it.

“I personally think they are going to get the 3 cents, but I don’t think they should,” said one buyer, who said producer margins are already high enough.

A producer said implementation of the increase will depend on whether the supply situation improves in September. For now, the producer said it believes supply is tight enough to support the increase.

Major North American PE producers include Chevron Phillips Chemical, LyondellBasell, Dow Chemical, ExxonMobil, Westlake, INEOS, Total, NOVA Chemicals and Formosa Plastics.

By Michelle Klump