US May LLDPE, HDPE contracts fall, LDPE steady on shorter supply

HOUSTON (ICIS)–US May contracts for linear low density polyethylene (LLDPE) were assessed at a decrease of 3 cents/lb ($66/tonne) from April while contract prices for high density polyethylene (HDPE) were assessed 2 cents/lb lower. Low density polyethylene (LDPE) contracts were assessed at a rollover.

Milk jugs are made from polyethylene, which is derived from ethane in the US. Photo by Food and Drink/REX/ShutterstockMilkFood and Drink

The decline in LLDPE contracts was attributed to relatively long supply for butene (C4) and hexene (C6) grades of LLDPE while octene (C8) LLDPE is still heard to be relatively tight.

HDPE contracts were assessed at a decrease as several sources stated that buyers who sought discounts were able to obtain decreases of 1-3 cents/lb between April and May, although other participants said that HDPE contracts rolled over for both months. As ICIS had assessed April contracts for HDPE at a rollover, the decreases seen in April and May were reflected on the May assessment.

Supply for high molecular weight (HMW) grades of HDPE is heard to be tight while blow moulding supply has also shown signs of tightening. HDPE injection supply is comfortable and sources said that price discounts on HDPE injection contracts are more widespread compared with HDPE HMW and blow moulding contract prices.

LDPE supply in the US is heard to be tight amid some ongoing turnarounds, with availability likely to remain constrained for another month or so.

Buyers have been pushing for lower prices for some time, arguing that the price increases implemented in the months after Hurricane Harvey should be rolled back as US producers have added over 3m tonnes/year of new capacity post-Harvey while operating rates at existing plants have improved.

Sellers, however, argue that PE price decreases are not justified as crude oil costs have risen over the past several months while new US plants continue to experience some operational disruptions.

The June outlook remains unclear, although participants will be closely watching inventory figures, with some arguing that prices may come under downward pressure if inventories continue to build. Exports will also provide an indication of the direction of pricing for the remainder of the summer as producers will need to find some additional export outlets as recent capacity additions have outstripped the anticipated rise in domestic demand.

ICIS assessed May contracts for LLDPE butene film at 61-67 cents/lb, high density polyethylene (HDPE) blow moulding at 64-68 cents/lb and low density polyethylene (LDPE) liner grade at 69-73 cents/lb, all on a delivered US in bulk basis.

Major US producers of PE include Chevron Phillips Chemical (CP Chem), DowDupont, LyondellBasell, ExxonMobil, Formosa, INEOS, Total Petrochemicals and Westlake.