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

Plastics help designers bring home the gold

July 22, 2014 2:15 pm ET

Products with polymer content received multiple gold recognitions in the 2014 International Design Excellence Awards.    More

Image

Munson Machinery expanding assembly, testing operations

July 22, 2014 2:02 pm ET

Munson Machinery Co. Inc. is expanding its headquarters factory by about one-third in Utica, N.Y., where the company makes mixing, blending and size-...    More

Image

DSM planning North American nylon plant

July 22, 2014 11:41 am ET

Materials firm Royal DSM NV plans to build a new nylon resin plant in North America, but no decision has been made on the plant's exact location.    More

Image

Design group Hexagon buys Vero Software to upgrade CAM capabilities

July 22, 2014 9:51 am ET

Stockholm-based Hexagon AB, a design technology company, has announced its acquisition of Vero Software, a leader in computer aided...    More

Image

Windmöller & Hölscher looking to continued growth in China

July 21, 2014 3:40 pm ET

With 2013 global sales of 600 million euros, China has grown into an important export market for Windmöller & Hölscher KG, second only to the United S...    More

Market Reports

Injection Molders Market Report & Ranking 2014

This special package contains our 132-page 2014 Market Report on the Injection Molding segment and our exclusive 2014 RANKINGS database of 500+ Injection Molders for a discounted package price.

Learn more

Plastics Recycling Market Review & Outlook 2014

This special report from Plastics News examines the North American plastics recycling industry and provides insight into indicators that impact market viability, including Resin pricing trends for virgin and recycled market material and historical Resin production trends for post- consumer and industrial waste.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

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

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events