North American polyethylene resin prices surprised the market by increasing an average of 3 cents per pound in August.
The late-arriving price hike was confirmed by several buyers contacted by Plastics News. Prices had been flat in July after dropping 3 cents in June.
Counting the August increase, prices now are up a net of 6 cents so far in 2023.
Market watchers said that higher PE exports from North America tightened domestic supplies of the material and allowed the August hike to take hold, even though PE demand in the region hasn't been strong this year.
"Exports had an effect on the market," market analyst Mike Burns said. He added that PE demand could improve in September as a result of seasonal trends in the packaging sector.
In an email to PN, market analyst Howard Rappaport said domestic PE demand "is still underperforming, but there are some signs of improvement."
"Buyers have been keeping only modest inventory levels as well," added Rappaport, who's with StoneX Financial in New York. "A more active export market and supplier resolve are also two of the drivers [behind the PE price increase]. Ethylene feedstock costs have been relatively flat … so it certainly isn't a cost push at this point."
Regional PE supplies are being affected by Chevron Phillips Chemical Co.'s decision to place force majeure supply limits on high density PE resin made at one of the firm's plants in Orange, Texas. CP Chem made that move in late August after an equipment failure at the site. Nova Chemical's PE resin production also is being affected by ethylene operating issues at its sites in Ontario, sources said.
In a recent market update, research firm ICIS of Houston noted big increases in U.S. PE exports to China in the first half of 2023. In that six-month period, the U.S. became China's largest source of imported linear low density PE, helping keep the U.S. market balanced for that material.
U.S. LLDPE makers sold more than 1.4 billion pounds of LLDPE into China in the first half of 2023. That's almost 1 billion more pounds than China imported from the U.S. in the same period in 2022.
Comparing the same six-month periods, U.S. HDPE exports into China jumped from about 130 million pounds to almost 600 million pounds. John Richardson of ICIS pointed out that both the U.S. and Canada have advantaged feedstock costs vs. most of the rest of the world.
Large amounts of PE capacity have been added in North America in the last decade because of improved access to low-cost natural gas from shale deposits. Much of this new capacity has been targeted for export markets, since the amounts added are far more than what's needed to handle domestic demand growth.
"The U.S. needs to export 45 percent of its PE production in general to hit operating rates of 90 percent," Richardson said. "The logistical challenges that held up exports in 2022 — shortages of trucks, rail cars and warehouse space — seem to be largely over."
So far in 2023, increased PE exports to China and other global destinations have served to prevent North American PE prices from falling, even though many processors had anticipated lower prices.
Regional PE makers now are seeking increases of 3-5 cents per pound for September. Market sources were split on the chances of those hikes being successful.