AFPM ’14: US PE buyers hoping for price decrease heading into Q2

HOUSTON (ICIS)–US polyethylene (PE) buyers are hoping the second quarter brings the first price decline since November 2012, as production issues are resolved and supply continues to improve throughout the supply chain, sources said heading into the American Fuel & Petrochemical Manufacturers (AFPM) International Petrochemical Conference (IPC).

After flat pricing in March, several producers in the US PE market have announced a 6 cent/lb ($132/tonne) price increase for April. However, with a few of the largest suppliers in the PE market not announcing an April increase, most market participants have said that there is no support for higher prices, with some adding that they actually expect prices to fall slightly.

“There is no reason for PE to go up – there is plenty of it around,” said one buyer, adding that it sees a potential for prices to drop, possibly as early as May.

A price drop of any kind would be a major reversal in a market that has seen prices rise by 20 cents/lb for high density polyethylene (HDPE) and 18 cents/lb for low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) from where they were in December 2012.

Prices received support in 2013 and early 2014 from tight supply caused by a number of plant production problems, with many of the first quarter problems resulting from severe weather that hit much of the US in January and February. The tight supply was also a result of a record export month in December 2013, when producers exported more than 900m lb of PE.

Now, however, buyers and suppliers agree that the market is in better balance.

That improved supply, combined with a significant decline in feedstock ethane costs, as well as less material being exported, has some market participants saying the time is ripe for a price drop.

“Ethane is coming down … and international pricing is dropping,” said one market participant. “The US is alone in continuing to try to push the price up.”

The bearish sentiment is not held by all market participants. Many sources have said that they believe producers will continue to hold pricing power until at least 2016, when the first of the new capacity associated with new planned crackers comes online.

Hosted by the AFPM, the IPC takes place 30 March-1April in San Antonio, Texas.