North American polyethylene makers were not able to get everything they wanted in January, but they were able to nudge prices up an average of 3 cents per pound.
PE makers had been seeking increases of 6 cents per pound, but were deterred by slowing export demand and by crude oil prices dropping close to $90 a barrel after briefly touching $100, according to several buyers contacted by Plastics News.
Producers of PE ``had the 6 cents tied in to $100 oil, so when it went down, they were stuck,'' a Midwestern PE buyer said.
Slowing exports also have had an impact on North American PE, since exports were a major source of growth for the market in 2007. Through November, regional exports of low density PE were up 11 percent, while exports of linear LDPE climbed 13 percent and exports of high density PE catapulted 47 percent vs. 2006, according to the American Chemistry Council in Arlington, Va.
The export boom supported disappointing domestic sales, which were flat for LDPE, up less than 1 percent for HDPE and up only 1.5 percent through November for LLDPE.
PE makers now are seeking the second 3 cents of the original 6 cent move in February - but that attempt might be affected by reports that some large buyers were able to delay taking the first 3 cents until early February. A 5 cent move originally nominated for Feb. 1 has been postponed, sources said.
In the short term, North American PE supplies will be affected by force majeure caused by an unscheduled shutdown of a plant operated by Flint Hills Resources in Odessa, Texas. The plant has annual capacity of 420 million pounds of LDPE and 220 million pounds of LLDPE, as well as 190 million pounds of polypropylene.
North American selling prices for PE soared more than 20 percent in 2007 as ethane feedstock continued to track the price of crude oil, rather than that of natural gas, which it had tracked for many years. Prices for U.S. crude oil futures hit a record closing Jan. 3 at $99.77, but were just under $90 in early trading Jan. 31. Prices had been below $75 as recently as mid-September.
``The price of polyethylene is becoming more based on global demand and the price of oil and less on U.S. demand,'' said Mike Burns, a market analyst with Resin Technologies Inc. consulting firm in Fort Worth, Texas.
Burns added that soft demand in the North American PE film market played a role in the partial failure of the 6 cent January price hike.