Surprise! North American polyethylene prices up 5 cents per pound

By Frank Esposito
Senior Staff Reporter

Published: January 12, 2012 6:00 am ET

Related to this story

Topics Materials, Suppliers

AKRON, OHIO (Jan. 12, 2:10 p.m. ET) — In a surprising reversal, a 5-cent North American polyethylene price increase that seemed to have faded away in December actually took hold in the market.

Many buyers contacted mid-month by Plastics News indicated that they did not expect the increase to stick. But between then and the end of the month, numerous factors – including lower producer inventories and higher raw material prices – combined to push the 5 cents through.

One Texas-based PE buyer said that the 5 took hold “after much consternation, haggling and arm twisting.”

“I still don't think [PE makers] should have won [the increase], but we have to live with it,” he said.

At PE maker Westlake Chemical Corp, in Houston, senior vice president Jeff Taylor said that there were “several factors in place” that helped the increase go through, but that PE makers still had a big challenge in winning an increase during December, which historically is a slow business month for PE.

“Demand in December was stronger than expected,” Taylor said by phone Jan. 12. “But the problem we still have [in pricing] is the lag time. We took a big hit in October/November when prices went down while our raw materials costs went up.”

One PE buyer said the December increase was the first seen in that month since 1994. The late December push provided all of the market’s price gains for 2011. Prices had been up as much as 11 cents per pound mid-year before giving back all of that amount by November.

Demand was far from robust in 2011, with high density PE sales up only 2 percent and sales of low and linear low density PE each declining about 1 percent in the first 10 months of 2011, according to the American Chemistry Council in Washington.

The December hike also succeeded in part because of unplanned PE production outages seen by Exxon Mobil Chemical Co. in Mont Belvieu, Texas, and by Nova Chemicals Corp. in Moore Township, Ontario.

PE makers were reacting to market realities in pushing for the December increase, according to Phil Karig, managing director of the Mathelin Bay Associates LLC consulting form in St. Louis.

“The drop in [PE] resin prices had been sharper than what the producers felt comfortable with,” Karig said Jan. 12. “And with the increase in raw material prices, all of the things that might have caused [the increase] not to go through were thrown by the wayside. Producers were feeling real pressure on profitability.”

Global raw material costs also play a role, Karig added. So the fact that U.S. oil prices have climbed more than 4 percent in the last month – and remain above $100 per barrel - has a bearing on the PE market, even though most North American PE is based on natural gas – which remains low-priced at less than $3 per million British thermal units. Oil is more commonly used as a PE feedstock in other parts of the world with the exception of the Middle East.

North American PE makers now are working on increases of 6 cents per pound for January, with several producers announcing increases of 7 cents per pound for February as well. Market watchers said that there’s a good chance that at least some of the January increase will be successful.

None of this makes life any easier for the region’s PE buyers.

“I couldn't get any supplier to break ranks and push the [December] increase even for volume commitments,” an Illinois-based PE buyer said.

Another Texas-based PE buyer said that he was frustrated by the PE market’s approach to pricing, which can lead to late settlements and overdependence on third-party price indexes.

“This industry isn’t short on intellect, but it’s short on leadership,” he said.


Comments

Surprise! North American polyethylene prices up 5 cents per pound

By Frank Esposito
Senior Staff Reporter

Published: January 12, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

'Thermoforming has nearly limitless possibilities'

April 18, 2014 12:54 pm ET

Julie McAlindon of PolyOne Corp. speaks about the future of thermoforming and the integration of Spartech Corp.    More

Image

Ascend targets nylon for auto applications, opening propylene monomer unit in Texas

April 18, 2014 10:57 am ET

Materials firm Ascend Performance Materials Inc. is in full operation at its new nylon 6/6 compounding line in Florida and will break ground by the...    More

Dutch company launching $100 million PP, PE recycling plant

April 18, 2014 10:42 am ET

Quality Circular Polymers is building a new plastics recycling operation in Geleen, the Netherlands' Chemelot industrial chemical site, with a...    More

Lumena suspends trading, delays report amid claims of 'misrepresenting' financials

April 18, 2014 10:19 am ET

China Lumena New Materials Corp., which says it has the world's largest manufacturing capacity for polyphenylene sulfide resin, has suspended its...    More

PolyQuest spins off FiberQuest unit

April 18, 2014 10:14 am ET

PolyQuest Inc. has spun off its FiberQuest unit — which distributes polyester staple fibers and cotton — as a separate company.    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Automotive Market Review and Outlook 2014 The Americas

This 75-page report features in-depth analysis of the automotive industry for the Americas. It includes discussions of market trends, legislative/regulatory activity impacting production and threats as well as design strategies being implemented by the major automakers. Detailed charts and data tables outline North American automotive production over the last five years.

Learn more

Plastics Building & Construction Market Review and Outlook 2014 with MS Excel chart data

This report provides in-depth analysis of the plastic building and construction market for North America, including discussions of trends, opportunities, threats and the latest developments in construction trends that impact plastics processors.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events