Average per-pound selling prices for North American polyethylene have climbed 6 cents since Aug. 1, and many PE producers and buyers are expecting further price increases in the wake of logistical problems caused by Hurricane Katrina.
The effects of the deadly storm - which hit the Gulf Coast on Aug. 29 - have caused processors to agonize about their ability to get the materials they need. Some buyers have reported being placed on 50 percent allocation by their PE suppliers, meaning they'll get half of what they need. Other buyers report that 50 percent may be a generous estimate, and that actual deliveries will be less than that.
And it's not just an issue of resin plants getting the ethylene feedstock they need to make PE. Another big factor is the ability of potentially damaged rail lines to get finished resin out to the processor market.
Katrina hit at a time when PE demand was rebounding after a slow start to the year, in which selling prices dropped an average of 10 cents per pound. Since that low point, prices are up 12 cents, with another 7 on the table for Sept. 15. For octene-based grades of linear low density PE made by Dow Chemical Co. and Nova Chemicals Corp., the Sept. 15 increase is 9 cents.
Resin makers already were ramping their plants up to full production to meet rising demand. In addition, ethylene supplies already were tighter than normal because of unplanned outages, maintenance turnarounds and weather-related damage to an ethane plant in western Canada.
``It's an `all of the above'-type situation,'' said Nick Vafiadis, an industry analyst with Chemical Market Associates Inc., a consulting firm in Houston. ``Resin inventory was getting tight before, then there were [ethylene] operating issues and demand went up overseas. Now there's even less [ethylene] monomer available.''
According to a CMAI report, almost 17 percent of U.S./Canadian ethylene capacity either was shut down or operated at reduced rates during Hurricane Katrina.
Market watchers say the 7 cent move for Sept. 15 is practically guaranteed, with support gathering for a 5 cent move announced by some PE makers for Oct. 1.
Through June - and prior to the run-up in demand - U.S./Canadian LLDPE sales were up 2 percent, with LLDPE sales to distributors up 46 percent, according to the American Plastics Council in Arlington, Va. In high density PE, sales were down 2 percent, although sales into corrugated pipe were up 11 percent and sales into injection molded crates and totes were up 8 percent.
In LDPE, sales were down 3 percent, even as sales into industrial liner film grew 20 percent.