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

West Coast ports dispute impacts machinery imports

February 27, 2015 5:00 pm ET

Asian machinery companies got caught in the West Coast ports labor dispute — causing some headaches to get equipment ready for NPE 2015.    More

Image

Experts explain why resin sales are down in a healthy US economy

February 27, 2015 1:58 pm ET

The economies of the U.S. and Canada posted solid growth in 2014 — even though resin demand in those countries lagged behind.    More

Image

Industry vet Dwight Morgan joins M. Holland

February 27, 2015 1:55 pm ET

Resin distribution leader M. Holland Co. has hired industry veteran Dwight Morgan as its vice president of corporate development.    More

Image

Wittmann, Illig among machinery firms boosting investments in India

February 27, 2015 1:34 pm ET

GANDHINAGAR, INDIA — Expected growth in the Indian plastics market is leading several global machinery firms to make investments there,...    More

Image

Indian masterbatch makers growing locally and thinking globally

February 27, 2015 1:30 pm ET

GANDHINAGAR, INDIA — India’s masterbatch makers are expanding their domestic capacity to meet growing demand, as some are also moving ahea...    More

Market Reports

Flexible Packaging Trends in North America

North America represents about 30 percent of the global consumption of flexible packaging. Annual growth in this region is forecast at 4 percent during the next 5 years.

For more insight on growth opportunities, drivers of growth and the outlook for 2015, download this report.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 billion plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Upcoming Plastics News Events

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events