US August PE contracts end flat, producers eye future increase

29 August 2013 22:59 Source:ICIS News

US August PE contracts end flat, producers eye future increaseHOUSTON (ICIS)--US August contract negotiations for polyethylene (PE) ended in a rollover after the biggest producers separately agreed earlier this week to give up on proposed increases for all grades and to settle flat, leaving on the table just proposed increases for next month, sources said on Thursday.

Up until the end of last week, most producers had been separately telling buyers that they planned increases for September on an average of 5 cents/lb, with the possibility of part the increase or even an additional amount, added to their August billing.

However, early in the week, market sources reported hearing from their biggest suppliers that all proposed increases on all grades will not go in effect until after 1 September, leaving August prices unchanged. By Thursday, all producers had followed suit, sources said.  

“With the biggest producers agreeing to go flat, it would have been difficult for any of the smaller ones to keep pushing any August increase in any grade,” one buyer said.

The flat settlement for August means that the 2 cents/lb ($44/tonne, € 33/tonne) margin bump HDPE producers implemented in June when other PE grades settled flat continues.

For September, most producers have nominated price increases of an average of 5 cents/lb for all grades with Total seeking as much as 7 cents/lb.

“They will never get the 5 cents/lb. Lucky if they do not go down,” one source from the buying side said, adding that producers have not had success in other recent price increase nominations. Other buying side sources said neither feedstock values nor demand justify increases and that unless there is a hurricane hitting the US gulf coast, prices may not see changes next month.

At least two sources from the buying side said that there will not be any impact in September from an allocation announced on Wednesday to its customers by ExxonMobil on HDPE, following an expected outage of one pipeline carrying ethylene to its Baton Rouge plant in Louisiana. The allocation means there will be reduced supply from the plant. That plant, with a 900,000 tonne/year capacity as described by sources, is ExxonMobil's biggest HDPE plant in the US.  

Following the August settlement, prices for LLDPE butene film were at 74-76 cents/lb DEL (delivered), LDPE film prices were at 83-85 cents/lb DEL and HDPE blow moulding prices were at 74-76 cents/lb DEL, for small volume buyers, as assessed by ICIS.

Major US PE producers include Chevron Phillips Chemical, LyondellBasell, Dow Chemical, ExxonMobil, Westlake, INEOS, Total, Nova Chemicals and Formosa Plastics.

By Renzo Pipoli