Polyethylene (PE) supply levels will likely improve as prices are pressured upwards by higher global prices. The effects of Hurricane Harvey will slow down offers from the US, but sellers will likely be keen to re-establish trade routes into Africa. These were being established earlier in the year, following the first of numerous planned production capacity expansions.

Polyethylene (PE) demand is expected to improve in the coming months as the rainy season ends and end-user consumption levels increase. There are external issues that continue to hamper growth of demand, for example, in Kenya, where the disputed election is scheduled to be re-run in October. The overall expectation is for improving order levels, supporting higher prices.

Domestic supply in Asia, particularly China, is expected to increase due to several plant start-ups and resumed production in the fourth quarter. In southeast Asia, there are few scheduled turnarounds, although a couple of plants are expected to maintain a lower production rate if feedstock ethylene prices remain relatively high compared to polyethylene (PE) prices. Delayed arrivals of previously purchased Iranian import cargoes into China might increase the supply further.

Some market participants expect demand to improve in the fourth quarter amid relatively low inventory levesl of end-users. Sellers typically lower their offers in the later part of the year in a bid to move their cargoes, which might improve buying interest and trade. However, market sentiment might remain weak due to lower-than-expected end-product demand which might cap the increase in demand for import PE resins.

Many polyethylene (PE) buyers in Europe are expecting supply to increase in the fourth quarter. The spate of cracker outages will be over, and some new capacity in North America will be on stream. PE assets are running hard and well, and producers' margins are good - under such circumstances production could be expected to continue to run at high rates. The train transport issues in Europe are also expected to be over by mid-October, and deliveries are expected to be back to normal. The situation in the US, where hurricanes have affected production, may have a counter effect on these expectations, said some sources.

Much of the demand in the fourth quarter depends on how much buying in the third quarter was done as a precaution, rather than for need. End-year rebates are a contributing factor to PE demand at the end of the year, as agreed volumes must be met for a buyer to be able to access an extra rebate that affects all volume bought throughout the year, and this will support demand. New capacities in North America will be coming on stream, and while the bulk of material is expected to come to Europe in 2018, some is expected to be available at the end of 2017.

Polyethylene (PE) supply will increase with new production capacity in the US that will partially go to Latin America.

Polyethylene (PE) demand historically goes down in the last two months of the year because buyers seek to reduce inventories to minimise taxes. There is also diminished activity because of the year end holidays.

Polyethylene (PE) supply in the Middle East is expected to remain largely stable, with few planned turnarounds. Prices for the quarter are thus likely to see limited supply-driven upward pressure. Exports from India are set to increase following the start-up of a new domestic facility early in the quarter, adding to supply volumes and weighing on prices across Asia.

Polyethylene (PE) demand in the Middle East is expected to increase, supported by a need to restock inventories after the seasonally slow summer period. The reopening of the Iraq-Jordan border in late August is also expected to lead to improved demand within the region in the months ahead. Demand for imports into India for LLDPE and HDPE key grades is likely to come off sharply following a start-up of a new domestic facility. Demand and offtake in the key China market continues to influence demand and offtake in Pakistan, a market that solely depends on imports.

Supply will be more consistent until the end of the year, with sellers looking to cater for increasing demand and fewer planned production breaks in the Middle East. Imports from the US may continue to suffer from outages connected to hurricane Harvey. Sellers offering volumes from Europe may also show a preference to the US.

Demand levels are expected to improve in the coming months as increasing prices drive buyers to purchase. Many have been living hand to mouth in previous months. There could also be fears about supply levels, as the fallout from Hurricane Harvey limits potential US exports and high Asian pricing attracts sellers’ offers away from the Turkish market.

The tightening in PE supply is expected to linger into the fourth quarter as Chevron Phillips Chemical's (CP Chem's) Cedar Bayou facility is likely to remain shut throughout much of the quarter. The facility took heavier than expected damage during the storm.

US polyethylene (PE) demand should remain steady as producers and traders gear up for higher export targets into 2018 as new capacity is set to come online.

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PE Supply and Demand

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Plastic Packaging and the Circular Economy

Plastic Packaging and the Circular Economy

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US polyethylene oversupply could have mixed impact in Latin America

New polyethylene (PE) production coming online in the US Gulf in the first quarter of 2018 could bring oversupply of product in Latin America, but the impact on each country will be different, considering that the regional economies are on different stages of development and have different import tariffs.

Download the ICIS outlook article by editor-in-chief George Martin

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What is Polyethylene?

The three main types of polyethylene (PE) are low density PE (LDPE), linear low density PE (LLDPE) and high density PE (HDPE).

HDPE is a thermoplastic white solid whose molecular chains are comparatively straight and closely aligned. It is resistant to most chemicals, insoluble in organic solvents and has high impact and tensile strength.

LLDPE is a thermoplastic, translucent white solid whose chains are comparatively straight and closely aligned, and has a lower density than HDPE.

LDPE is a thermoplastic white solid which has highly branched and widely spaced molecular chains.

End uses of HDPE include blow-moulding applications such as bottles, packaging containers, drums, fuel tanks for automobiles, toys and house wares. Injection-moulded articles made from HDPE include crates, pallets, packaging containers and caps, paint cans, house wares and toys.

LLDPE's short chain branching gives it higher tensile strength, puncture and anti-tear properties, making it particularly suitable for high strength film applications.

LDPE is used mainly in film applications for both packaging and non-packaging uses. Other markets include extrusion coatings, sheathing in cables and injection moulding applications.

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