European expectations for US PE imports loom large but no prompt supply

21 May 2018 11:43 Source:ICIS News

ExxonMobil Baytown cracker

LONDON (ICIS)--European polyethylene (PE) buyers are waiting for imports from new US capacities to arrive in the region, but volumes have been sparse and most sources do not expect much significant supply for weeks yet.

Many European buyers visited the recent NPE plastics show in Orlando, Florida, eager to show interest in new volumes being produced in the US.

“We didn’t really manage to secure any volumes, but it was interesting to see how producers have different approaches," said one buyer.

"Some are budgeting their volumes to each market, and others are just sending as much as they can to Asia.”

Netbacks are clearly of interest to producers of new volumes, and Europe remains resolutely weaker compared to other regions in many grades.

Free on board (FOB) US levels are often higher than net delivered prices in Europe.

US product is also subject to a 6.5% import duty, the same as from countries in the Gulf Cooperation Council (GCC).

The above graph shows the FOB US high density polyethylene (HDPE) blowmoulding price, the China cost and freight (CFR) level, and the net spot northwest Europe (NWE) blowmoulding level, minus costs and 6.5% duty, to give a an idea of an equivalent CFR price into Europe.

European prices in dollar terms are lower than formerly because of the weakness in the euro compared with the US currency.

Europe saw an incursion by one US seller in April, and C4 (butene based) linear low density polyethylene (LLDPE) led to a bout of fierce resistance from local suppliers, who did not intend to give up any market share.

Some sources expect new US capacity to be absorbed with only a tweak down of existing production rates, but the skirmish that resulted in the recent foray into Europe suggested it might not be so simple.

The main question at present is when Europe can realistically expect to see more significant volume from new US capacities.

Traders have found it difficult to get hold of large volumes for import, and C4 LLDPE is the grade that seems to be most readily available, although volumes are not high, prices not cheap, and infrastructure problems are not unusual.

Some HDPE is on its way but via established channels, and to regular buyers, said one producer.

Another said it did not expect any HDPE spot offers from new production for months, given the current status of plant start-ups.

Recent/upcoming North American new PE plants

Company Capacity ‘000 tonnes Grades Location Start-up
Sasol/INEOS 470 HDPE La Porte, Texas, US Nov 2017
ExxonMobil 1,300 mLLDPE, LLDPE (2 x 650) Mont Belvieu, Texas, US End 2017
Chevron Phillips 1,000 HDPE, mLLDPE Sweeny, Texas, US Q3 2017
Dow Chemical 400 Elite PE Freeport, Texas, US Q3 2017
Dow Chemical 350 LDPE Plaquemine, Louisiana, US Q4 2017
Sasol 470 LLDPE Lake Charles, Louisiana, US 2018
Sasol 420 LDPE Lake Charles, Louisiana, US 2019
Formosa Plastics 800 HDPE (400), LDPE (400) Point Comfort, Texas, US H2 2018
Dow Chemical 125 Bimodal HDPE/MDPE Seadrift, Texas; St Charles, Louisiana 2018
LyondellBasell 500,000 HDPE LaPorte, Texas Mid-2019
ExxonMobil Chemical 650 PE (unspecified) Beaumont, Texas 2019

While players are discussing potential arrival dates of new product imports for 2018, and where the best netbacks can be achieved, at some point exports from the US are expected to be more widespread once more capacity comes on stream.

A good portion of the new PE is destined for export.

PE is used in packaging, the manufacture of household goods, and also in the agricultural sector.

Pictured: US energy and petrochemicals major ExxonMobil's Baytown new ethane cracker in the Gulf Coast
Source: ExxonMobil

Focus article by Linda Naylor

By Linda Naylor