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

2014 sees modest sales increase, but profit decrease, for Dow Chemical

January 29, 2015 4:20 pm ET

Dow Chemical Co. delivered modest sales growth in 2014, but the firm's profit took a tumble.    More

Image

Resin prices continuing to tumble

January 29, 2015 2:24 pm ET

The ongoing slide in crude oil prices is taking commodity resin prices down as well.    More

Image

Materials firms look for stock rebound

January 29, 2015 1:52 pm ET

DuPont Co., A. Schulman Inc. and Rogers Corp. thrived amid the stock market chaos of 2014, but the other 12 publicly held materials firms tracked by...    More

Image

Chemtrusion, Mytex Indiana compounding plant set for expansion

January 29, 2015 1:35 pm ET

Japanese and American partners in a compounding plant in Indiana plan to expand the facility.    More

Image

DuPont-Chenguang JV to produce fluoroelastomers in China

January 29, 2015 12:30 pm ET

DuPont Fluoropolymer Solutions and Zhonghao Chenguang Chemical Research Institute Co. Ltd. are proceeding with a 50-50 joint venture to serve the fast...    More

Market Reports

Plastics in Automotive: Innovation & Emerging Trends

This special report newly released by PN and sponsored by The Conair Group examines current trends in the use of plastics in automotive, materials innovations and the changing landscape. It includes a review of legislative/regulatory activity impacting vehicle development and lightweighting, market opportunities & challenges for mold and toolmakers, innovative design strategies being implemented by major OEMs and suppliers, as well as a review of key indicators in Canada, Mexico, Brazil and China.

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

Injection Molding Market Analysis & Processor Rankings

Plastics News BUNDLED package contains our in-depth Market Analysis of the Injection Molding segment. You will gain keen insight on current trends and our economic outlook.

As a BONUS this includes PN's updated 2014 database of North American Injection Molders RANKED by sales volume. Sort, merge, mail & prospect by end market, materials processed, region, # of plants and more.

Learn more

Upcoming Plastics News Events

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

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

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

More Events