AFPM ’17: Small hike or roll for US March PE contracts

SAN ANTONIO (ICIS)–US polyethylene (PE) contracts rose in February but heading into this weekend’s International Petrochemical Conference (IPC) in San Antonio, Texas, there are doubts that March will make it two in a row.

Producers separately issued at least half a dozen proposals to raise US PE prices by a penny more than the February hike of 5 cents/lb, though most PE watchers considered such an increase unlikely.

The early consensus was that it made sense only if cut in half. ExxonMobil this week confirmed that opinion by reducing its March increase to 3 cents/lb from the original 6 cents/lb, according to a letter the company sent to customers.

ExxonMobil said the “restatement” included an additional 3 cents/lb increase for 1 April and applied to all high-density (HDPE), low-density (LDPE) and linear low-density (LLDPE) resins sold by the company.

But sceptics said the March hike served only as a backstop for the February increase, providing a slightly more expensive choice for customers who did not buy material in January or February.

A longtime PE watcher said slipping ethylene spot prices and lacklustre demand became major obstacles for the March hike.

The PE watcher predicted that March contracts for the polymer will roll over from February, because ethylene contracts for the month will drop at least 5 cents/lb and global export prices are dropping because of declining prices in China. Domestic PE prices there have sunk below the prices for imports in recent weeks.

“The whole world has stopped buying PE,” that source said. “It’s like a disease. It started in Asia and spread around the world.”

There has been no conclusive settlement yet for PE, but talk in the US market went back and forth between the half-increase and a rollover this week. A stretch film producer said LLDPE material had rolled for March. But there was no final settlement yet.

Final industry data released this week showed February PE sales declined both on year-on-year and month-on-month bases.

February PE sales dropped by 2.6% compared to the same month last year, and dropped by almost 6% from January, according to data from the American Chemistry Council (ACC).

February 2017 US PE data, in billions lbs

Source: ACC

Source: ACC

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

Sponsored by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC runs 26-28 March in San Antonio.