Home > Chemical News

Chemical News

Polyethylene Market Update in North America, November 12, 2007

https://www.chemnet.com   Nov 14,2007 The Plastics Exchange
Volume: Good
Price: Steady/higher
The spot Polyethylene market was steady this week. While fresh domestic railcar offers remain firmly planted at prices a nickel higher than October, we have yet to see a single purely spot car trade that much higher. Distributors are now reporting a low, but growing flow of normal orders for November business; however, while resin is invoiced $.05/lb higher, it is understood that the price would be rebated if the increase were to give way.
Polyethylene producers have issued a total of $.11/lb of price increases for Nov contracts with the $.06/lb balance targeted for mid-month implementation. At the time that the increases were announced, spot Ethylene prices had run towards the mid-$.50s/lb due to cracker outage induced supply constraints. Even before a few crackers were brought down, excellent monomer and resin demand, much of it from overseas buyers, had whittled Ethylene inventories to uncomfortably low levels.

Although October Ethylene contracts settled $.05/lb higher to $.575/lb, spot Ethylene has since been under pressure as cracker capacity has returned on-stream. There are still two more crackers expected to return to production in the coming week or two. Spot Ethylene has been trading just under $.50/lb, so resin buyers would argue that the Polyethylene increases are just not needed at this time.

Polyethylene producers are still keen to increase resin prices, and have yet to budge from their fully increased pricing. Polyethylene buyers are equally entrenched, secure behind a mountain of resin purchased ahead of these increases.
For most of 2007, the export market has provided an excellent outlet for Polyethylene, with netback prices sometimes exceeding those from domestic sales. A very weak US dollar has aided international traders in purchasing US commodity products as they do not seem quite so pricey when converted back to their native currencies. So far in November, we have not seen the type of export trading that would suggest that the market can be forced higher without the consent of major domestic processors.
In fact, Houston packaging houses have even been calling around soliciting business again. While there has been enthusiastic export interest, particularly from European buyers as the dollar fell to $1.47/Euro, export offers have been priced too high to enable high volume trade. As the calendar turned to Nov, the export price was generally hiked $.05/lb along with domestic resin.

The sharply higher export offers shut off fresh trade, although it did provide export traders stuck with inventory the opportunity to move plenty of resin at nice prices. Over the past week or so, Polyethylene producers' offers have come down a couple of times, now mostly to level $.02-.03/lb over late October pricing, but it might be too little, too late. Rather if export offers started steady in November and then stepped higher, export Polyethylene might be actively trading $.02-.03/lb higher by now.

Given softer exports (but good interest!) and with spot Ethylene off nearly a nickel these past weeks, we are impressed with Polyethylene producers resolve to hold pricing firmly higher so far in November. Given current market conditions, it would be quite a coup for November contracts to secure at least the first part of the $.11/lb of increase currently in play. We have seen enough markets to know that anything is possible.
 Print  |    add to Favorites  |    Close