In a bit of a spring surprise, North American polyethylene prices have climbed an average of 3 cents per pound since May 1.
Buyers contacted recently by Plastics News indicated that PE makers' ability to export excess material helped the 3 cent move take hold, since doing so served to tighten domestic supplies. The export market has, in part, made up for weak domestic demand, as resin buyers try to decide if the North American economy has turned a corner.
Cash prices for natural gas feedstock used to make a majority of North American PE climbed from $3.25 per million British thermal units in late April to almost $4.50 in mid-May, but since then have fallen to almost $3.75. Natural gas prices have shown less of an upward trajectory than those of crude oil, which has been in the $60-per-barrel neighborhood recently after bottoming out at $34 in December.
PE prices have increased an average of 10 cents per pound or 17 percent on dairy blow molding grades of high density PE since January. Prices had plummeted 45 percent in the second half of 2008 as consumer demand and feedstock prices both tumbled.
Although inventory levels remain low and PE operating rates remain around 75 percent, PE suppliers were determined to get this [3 cent] increase though, said Mike Burns, a market analyst with Resin Technology Inc., a consulting firm in Fort Worth, Texas.
Oil prices are up, but ethylene supplies are still long, Burns said. Days of [resin] inventory may be at its lowest ever, but demand for resin also is at its lowest ever.
HDPE supplies could be affected later this year by LyondellBasell Industries AF SCA's decision to close a 480 million-pound-per-year plant in Alvin, Texas. Flint Hills Resources LLC also is closing a plant in Odessa, Texas, with annual capacities of 350 million pounds of linear low density PE and 440 million pounds of LDPE.
Regional HDPE demand fell 8 percent in 2008, according to the American Chemistry Council in Arlington, Va., with LLDPE sales off 7 percent and LDPE sales down 11 percent. That slump pushed HDPE and LLDPE demand back to 2005 levels, while LDPE demand cratered to its lowest level since at least 1996.