US November PE contracts settle lower on weaker oil, sufficient supply

HOUSTON (ICIS)–US November contracts for polyethylene (PE) settled 3 cents/lb ($66/tonne) lower from October as weaker crude oil futures and sufficient supply weighed on pricing.

The sharp drop in crude oil prices undermined the case for price increase initiatives of 3 cents/lb.

NYMEX WTI futures have plunged nearly $25/bbl since hitting their 2018 peak in early October and are currently trading near 2018 low points. Crude oil inventories are building, and US production is at record highs, resulting in downward pressure on oil markets.

Sufficient PE supply is putting downward pressure on prices. The US added over 3m tonnes/year of new capacity in 2017. Average operating rates have been good over the past several months, with no major plant issues.

PE inventories for high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) are at record high levels in 2018, following the start of new capacities for both products, according American Chemistry Council (ACC) data.

Source: ACC and Vault Consulting

Low density polyethylene (LDPE) inventories are at near record levels, although they have not risen as much as LLDPE and HDPE. Most of the new capacity added in the past year was for HDPE or LLDPE.

US PE contracts were also pressured down by global prices, particularly in China, where they continue to fall. The Chinese market is the largest consumer of PE, and price changes there are a leading indicator of likely price changes in other regions.

ICIS assessed November contracts for LLDPE butene film at 56-62 cents/lb, HDPE blow moulding at 59-63 cents/lb and LDPE liner grade at 64-68 cents/lb, all on a delivered US in bulk basis.

Major US producers of PE include Chevron Phillips Chemical (CP Chem), DowDuPont, LyondellBasell, ExxonMobil, Formosa, INEOS, Total Petrochemicals and Westlake.

Photo: PE is used to make bags.
Source: Dinendra Haria/REX/Shutterstock