Volume: High
Price: Rising
For the third time in as many months, Polyethylene producers and their domestic customers are standing toe-to-toe as they again negotiate the implementation of the $.04/lb price increase. Domestic offers in October have been light and priced fully higher, but processors have so far resisted hoping to again stave off the increase. Producers however, will be firmer this time around, as they face continued cost pressures from quickly rising Ethylene prices, which have rallied about $.06/lb during the past few weeks.
While domestic processors are waiting along the sidelines, producers' attention has again shifted to the export markets. Although Mexican and South American markets have been a consistent outlet for spot supplies, it is the recent resurgence in European buying activity that can provide the necessary demand to finally move the Polyethylene market higher again. While the arbitrage to Europe is not wide open, large orders are being booked on small margins.
Some producers, which have been long typical export grades such as HDPE Blow molding and LLDPE Butene, have been eager sellers and in high volumes. However, with spot Ethylene prices now above $.51/lb, not all Polyethylene producers are willing to sell at the export price, which is only in the high $.50s in bulk. Other grades such as LDPE fractional melt, High Clarity and EVA resins have also been in high demand at considerably higher prices, but these supplies have been tight and few offers have been made available.
US processors still complain about poor resin usage and demand destruction brought about by high resin prices. While the weak US dollar has done wonders to generate export demand for commodity products, it has not necessarily helped the added sales of many finished goods. These sales take a longer sales cycle and involve the opening of new channels rather than simply an arbitrage sale.
So while domestic demand does not necessarily support higher resin prices, higher feedstock costs and strong exports will very likely assist Polyethylene producers to increase their resin contracts in October. While it is too early to tell if the entire $.04/lb increase will become effective, we believe that at least a good part of it could.
Price: Rising
For the third time in as many months, Polyethylene producers and their domestic customers are standing toe-to-toe as they again negotiate the implementation of the $.04/lb price increase. Domestic offers in October have been light and priced fully higher, but processors have so far resisted hoping to again stave off the increase. Producers however, will be firmer this time around, as they face continued cost pressures from quickly rising Ethylene prices, which have rallied about $.06/lb during the past few weeks.
While domestic processors are waiting along the sidelines, producers' attention has again shifted to the export markets. Although Mexican and South American markets have been a consistent outlet for spot supplies, it is the recent resurgence in European buying activity that can provide the necessary demand to finally move the Polyethylene market higher again. While the arbitrage to Europe is not wide open, large orders are being booked on small margins.
Some producers, which have been long typical export grades such as HDPE Blow molding and LLDPE Butene, have been eager sellers and in high volumes. However, with spot Ethylene prices now above $.51/lb, not all Polyethylene producers are willing to sell at the export price, which is only in the high $.50s in bulk. Other grades such as LDPE fractional melt, High Clarity and EVA resins have also been in high demand at considerably higher prices, but these supplies have been tight and few offers have been made available.
US processors still complain about poor resin usage and demand destruction brought about by high resin prices. While the weak US dollar has done wonders to generate export demand for commodity products, it has not necessarily helped the added sales of many finished goods. These sales take a longer sales cycle and involve the opening of new channels rather than simply an arbitrage sale.
So while domestic demand does not necessarily support higher resin prices, higher feedstock costs and strong exports will very likely assist Polyethylene producers to increase their resin contracts in October. While it is too early to tell if the entire $.04/lb increase will become effective, we believe that at least a good part of it could.
