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September 26, 2013 02:00 AM

Polyethylene prices jump up 5 cents

Frank Esposito
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    Three months of flat pricing have come to an end for the North American polyethylene resin market, as prices shot up an average of 5 cents per pound in September.

    The increase was tied into tighter inventory levels and slightly stronger demand. Prices had been flat since May, marking only the third three-month stretch of flat pricing in almost 14 years. The previous two took place in mid-2000 and late 2009, according to the Plastics News resin pricing chart.

    “The market is relatively tight now, especially for [high density] PE,” a buyer in the southwest U.S. said. “Suppliers want more [price increases] now — and they're impatient.”

    Domestic PE sales growth is estimated at the low-to-mid single digits so far in 2013. Exports sales were especially high for HDPE and low density PE earlier in the year. Regional PE operating rates are reported to be high, but stagnant demand and a lack of price increase momentum had prevented processors from pre-buying between June and August, sources said.

    Production of HDPE at Formosa Plastics Corp. USA's plant in Point Comfort, Texas, also has been affected by a Sept. 13 fire at the unit, which already was down for maintenance. A fire earlier this year at the same unit limited its HDPE production for about a month.

    PE makers also have been enjoying high profit margins, largely as a result of low-priced feedstocks. Abundant and expanding supplies of natural gas are being used to provide ethane, which is then converted into ethylene and polymerized into PE.

    This scenario has led to better results at businesses such as Westlake Chemical Corp.'s olefins business unit. The unit — which includes PE and ethylene — posted operating income of almost $350 million in the first half of 2013 — up 22 percent vs. the same period in 2012.

    North America's feedstock advantage also has prompted several PE makers to announce plans to add capacity through debottlenecks or construction of new facilities. Announced projects — many of which are expected to come online in 2016 and 2017 — could increase the region's overall PE capacity by as much as 30 percent. A sizable portion of this new output is expected to be aimed at export markets, industry watchers have said.

    For the year, regional HDPE prices now are up a net of 16 cents per pound, while regional prices for LDPE and linear LDPE have climbed a net of 14 cents. Major PE makers now are seeking increases of 6 cents per pound effective Oct. 1.

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