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The changing rules of the polyethylene game will keep resin buyers on their toes in 2014, according to market analyst Mike Burns.
Burns — who is with Resin Technology Inc. in Fort Worth, Texas — recently said in his 2014 PE Outlook that the price of oil "has nothing to do with the cost to make a pellet in North America." But he added that oil prices "have everything to do with the price of the [PE] pellet globally.
"Polyethylene buyers should not expect new lower cost feedstocks [such as those from shale gas] to reduce prices," Burns explained. "PE pellets are priced at the highest global feedstock, and that has created a price floor for PE."
The fact that oil sets the global PE pellet price is one reason why PE prices continue to escalate, he added. Other reasons include supplier consolidation and discipline, inventory and exports and PE no longer being a commodity.
"Higher quality resin and consumer expectations have created highly specified resin requirements," according to Burns. "Flexibility has been reduced for the processor."
Through September, North American PE prices were up an average of 16 cents per pound in 2013, according to the Plastics News resin pricing chart.
U.S./Canadian sales of high density PE for 2013 were up 1.4 percent through October, according to the American Chemistry Council in Washington. Domestic HDPE sales grew almost 1 percent in that period, with export sales up almost 4 percent.
Export sales also improved U.S./Canadian sales results for low and linear low density PE through October. LDPE sales grew almost 2 percent, with a 0.5 percent domestic drop canceled out by export sales growth of almost 11 percent. The picture was similar in LLDPE, where export sales growth of almost 11 percent improved a 1.5 percent domestic growth rate to overall sales growth of 3.5 percent.
Looking ahead to 2014, RTi's Burns said that North American PE prices could remain at January levels for the year's first quarter if there's no significant inventory build in January and February. But he added that he does expect a price increase to be implemented during the first quarter.
"2014 is going to be a demand-driven year," he said. "There's no reason for price concessions if demand remains constant."
Burns also is continuing a Twitter feed that he began in early 2013. The feed — @RTiBurnsPE — offers insight and on pricing and inventory trends for the PE market.