US Feb PE contracts rise 4 cents/lb on tight supply

HOUSTON (ICIS)–February contracts in the US polyethylene (PE) market rose by 4 cents/lb ($88/tonne), based on tight supply caused by some production problems as well as logistical and delivery issues, sources said on Thursday.

With the February increase, prices for linear low density PE (LLDPE) butane film were at 83-85 cents/lb 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.

The increase ends a four-month string of flat pricing in the PE market and puts HDPE prices up a total of 20 cents/lb and LDPE and LLDPE prices up a total of 18 cents/lb since November 2012, the last time the market saw a price decrease.

Prices rose in part on tight supply, as at least three companies were operating under force majeureor product allocations during the month, while a fourth company extended a planned maintenance turnaround at one of its plants.

While any one of the issues alone would not have significantly impacted the market, sources said the combination of all of them has kept supply tight, particularly for HDPE and LLDPE grades.

“Business is strong and demand is strong, and production has not been strong at all,” said one producer, referring to the number of outages that have kept supply tight in the market.

Buyers agreed that they had little leverage during February to keep prices from rising – a situation many buyers expect to last until new PE capacity comes on line after 2016.

“The ball is in their court,” said one buyer, referring to producers. “You don’t have a lot of other options, other than pray for 2016 to come quick.”

Pricing for March is expected to be flat, with only one producer nominating a 6 cent/lb increase for the month. At least three other producers have announced a 6 cent/lb increase for April, with market participants split on whether some or all of that increase will be implemented.

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