US Polyethylene Export Prices Fall Amid Slower Demand, China Competition
U.S. polyethylene export sales have slowed in May following a rapid runup in prices during the first two months of the Mideast conflict, traders said this week.
“The export market is extremely slow, it seems like everyone stopped buying,” a trader said. “Most customers claim they just bought too much when the war broke out.”
Overseas PE buyers were worried about product shortages in the early days of the war and chased prices up.
Export railcar prices for high density polyethylene blow molding grade went from a pre-war 35cts/lb FOB Houston in late February to a high of 80cts/lb in the second half of April, according to PetroChem Wire by OPIS, a Dow Jones company.
Prices have since fallen back to the low-to-mid 60s cts/lb. Offers were heard at 65-66cts/lb FOB Houston in the past day or two, with larger volume deals heard as low as 62cts/lb for slurry process material.
Warehouses in Houston that package bulk plastics for export are operating at reduced rates of around 70%, sources said, and rail yards in the region reportedly are filling with loaded hopper cars as producers accumulate unsold inventory.
“There’s a lot of damage because of Chinese material undercutting U.S. producer prices,” another trader said. “Latin America is inundated with Chinese product.”
U.S. producers believe that Chinese traders and distributors will eventually deplete China’s coastal inventories and then buyers will see less availability, the trader said.
Other traders were uncertain that China’s exports would soon run out.
The rapid increase in international market prices has created a disconnect between Chinese domestic and export prices, so that even with 17% export duties, it makes sense for Chinese distributors to export domestically produced material, sources said.
Apart from the influence of lower Chinese offers on market sentiment, export market participants pointed to price increase fatigue and economic distress among overseas processors.
“It’s not the Chinese, it’s affordability,” a trader said. “Processors can’t absorb the prices the U.S. manufacturers are asking. We believe the market is well supplied.”
While some traders said the slow export demand would lead to a buildup of inventory and further price correction in June, others were less bearish.
“I honestly think this month is an aberration,” a U.S. distributor said of the pullback in prices. He noted that North American producers are running full out, while a significant percentage of global petrochemical feedstocks and plastics supply remains cut off by the Iran conflict.
Reporting by David Barry, dbarry@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com