HOUSTON (ICIS)--US polyethylene (PE) market participants are waiting to see the impact of new capacities and declining feedstock costs on prices, heading into this year's National Plastics Exposition (NPE).
The US added around 3.5m tonnes/year of new PE capacity in the second half of 2017 (see map and expansion chart below).
Although the market had anticipated that this capacity would impact pricing during the first quarter, this was delayed due to operational hiccups at new plants along with a period of severe winter weather along the US Gulf Coast.
As a result of these production losses, prices went up in the first quarter, keeping intact the cumulative 10 cent/lb ($220/tonne) increase implemented in the market in the months immediately following Hurricane Harvey during the second half of 2017.
While the market had originally anticipated that post-Harvey price hikes would gradually come off during the first quarter, these price increases remain in place heading into the summer months.
A similar trend occurred in the export market, with prices on a free on board (FOB) Houston basis returning to post-Harvey highs in February and March. Export prices came down somewhat in April as lower prices in other global regions weighed down on US exporters.
Domestically, ICIS assessed US contract prices at a rollover for March and April after assessing contract prices 4 cents/lb higher in February. Producers have deferred price increase announcements of 3 cents/lb originally announced for March into May, although most participants believe that easing supply concerns will begin to gradually bring prices down in the coming months.
Upstream, steep declines in feedstock ethylene prices may also bring some downward pressure onto the PE market. Spot ethylene sank to a 19-year low towards the end of April as slower-than-anticipated ethylene consumption from PE units depressed prices.
While most US PE producers within the US are backward integrated with ethylene units, falling ethylene prices will still generate some downward pressure on the PE market, as individual business units within larger petrochemical companies compete for margin.