Uncertainty delays US March PE settlement until early April

31 March 2017 19:29 Source:ICIS News

HOUSTON (ICIS)--Uncertainty about US polyethylene (PE) March contracts will extend into the first week in April because of a split in the market between those pushing for no increase and those seeking a 3 cent/lb ($66/tonne) hike, sources said on Friday.

The confusion started when a number of producers in the past week separately issued revisions of their March price nominations, changing the proposed increase of 6 cents/lb in March to 3 cents/lb. They will then pursue another 3 cents/lb for April.

ExxonMobil and NOVA Chemicals separately issued revisions on 24 March, and other producers followed.

One producer said that, while the earlier hike seemed “doable,” he was relieved when they cut it in half on the revision.

“I knew that would go down a lot easier,” the producer added.

Five stretch film producers followed the PE makers this week, separately revising increase letters issued in early March with new letters stating what their suppliers had done.

The letter to customers issued by Intertape Polymer Group (IPG) dated 28 March said “some market confusion arose, which resulted in a temporary delay” of the original hike nominated by its PE supplier.

IPG then reiterated the revised March hike proposed in separately issued letters by ExxonMobil, NOVA and other PE producers regarding the reduced hike for March and applying the same amount to April.

A buyer said the smaller increase for March was likely. “But I have my doubts about the April part,” the buyer added.

Inteplast Group, Sigma Stretch Film, Berry Plastics and Western Plastics also issued similar letters during the week.

Those wanting no increase for March, pushing for a rollover from February, focused on market fundamentals.

A distributor cited the expected drop in the monthly US ethylene contract, declining prices in China and other global regions, and weakening demand in the domestic PE market in February.

Final industry data covering the US and Canada showed February PE sales declined both on a year-on-year and month-on-month basis.

February 2017 US PE data, in thousands of lb

 

Feb ‘17

Feb’16

 

Total prod

3,143,423

3,387,470

-7.20%

Total sales

3,349,108

3,439,962

-2.60%

Total exports

690,505

855,507

-19.30%

Sales - exports

2,658,603

2,584,455

2.90%

Source: American Chemistry Council (ACC)

Subtracting exports from sales provides a more accurate picture of demand in the domestic market. Sales minus exports increased during February compared with the same month last year but dropped 4.6% from January this year, according to the data.

 

17-Feb

17-Jan

 

Total prod

3,143,423

3,494,420

-10.00%

Total sales

3,349,108

3,561,897

-6.00%

Total exports

690,505

774,197

-10.80%

Sales - exports

2,658,603

2,787,700

-4.60%

The conflict in the domestic PE data – up compared to February last year but down compared to the previous month (January in this case) - stems from what the industry calls “pre-buying” in January so customers could avoid a 5 cent/lb contract increase in February.

Major producers include Chevron Phillips Chemical, Dow Chemical, ExxonMobil, Formosa Plastics, LyondellBasell, NOVA Chemicals, Total and Westlake.

By Lane Kelley