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March 25, 2020 04:10 PM

PE price hike called off amid virus concerns

Frank Esposito
Senior Staff Reporter
Plastics News Staff
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    Regional prices for PET declined by an average of 1 cent in February after being flat in January.

    Changing market conditions related to the coronavirus pandemic have led North American polyethylene resin makers to suspend a price increase attempt for March.

    Most major PE makers in the region had been seeking increases of 4 or 5 cents per pound, effective March 1. In a letter to customers, officials with ExxonMobil Chemical of Houston said that they were suspending their 4-cent increase attempt "despite the significant increase in demand for products that society needs."

    Other PE makers have taken similar steps, market sources said. Demand for PE in food and medical applications have increased in reaction to the outbreak.

    "It would have been hard for [PE makers] to raise prices during a national medical crisis," a major resin buyer told Plastics News.

    Consulting and data firm ICIS of Houston hosted a webinar on March 25 that covered the resin and packaging markets. Americas Deputy Manager Zachary Moore said during the webinar that "there's a lot of downward pressure" on prime grades of PE and polypropylene because of lower oil prices and possible lower demand.

    The coronavirus "has had mixed effects" on resin and packaging markets, North America market development head Jeremy Pafford said. "If you're making personal hygiene products, you've been very busy, but if you make discretionary consumer products, it's been nerve-wracking."

    North American resin buyers also need to keep market factors in perspective, Consulting Vice President James Ray said.

    "You don't want to build excess [resin] inventory at a low price then get overextended on cash flow," he said.

    Ray added that food packaging demand isn't usually as affected by GDP declines as some other markets.

    "People are still going to eat," he said. "They might be eating chicken instead of steak, but there's still going to be plastic wrap around it," Ray said.

    Liquid food applications — including milk — account for almost 9 percent of annual high density PE consumption in the U.S. and Canada. Other food-related markets account for another 2.5 percent.

    Food packaging film accounts for almost 18 percent of U.S. and Canadian low density PE consumption and almost 17 percent of the region's linear low density PE use.

    In PP, food-related applications account for almost 11 percent of the North American market.

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