HDPE Outlook

According to Terry Bourgeois, Plastic Market Monthly Editor for Townsend Solutions, North American HDPE producers have pushed their May price incentives to June seeking anywhere between a10.0 to 20.0 cpp increase. Many market participants are skeptical that the June increases will take hold and are viewing them as more of a defensive posture by suppliers to keep prices from falling. Many buyers built their inventories ahead of the price increases and for some there is no hurry to buy.  However, there is also the possibility that if oil prices should spike again, global PE prices could move higher. We are also in the beginning of hurricane season, and it is not unusual for producers to keep a few cents on the table this time of year “just in case”.

PE producers are expected to maintain high operating rates in June, given the still healthy margins. Ethylene costs have declined and crackers are reported operating well, with their turnarounds complete, providing more ethylene than is needed downstream. No major PE production issues are being reported but some scheduled maintenance may prevent producers from running at full capacity.

HDPE spot export prices during the first full week in June continued their downward trend amid lackluster demand, falling between 3.5 and 5.5 cpp, and market participants say there is room for further declines before the month concludes.

US May ethylene contracts rose 0.75 cpp from April, settling at 35.50 cpp, fueled by higher ethane costs and higher average ethylene spot prices. Sources say US ethane rose a total of 1.275 cpp in May amid strong exports while ethylene spot prices fell about 3.375 cpp month-on-month amid high inventories and weak demand. Spot ethylene prices began May at around 33.00 cpp and immediately rose to their highest of 36.00 cpp on May 4th. Spot prices trended steadily downward the remainder of the month and ended the month trading at a low of 29.42 cpp. Heading into June, the decrease in export demand from Europe has fueled the recent decline in US spot pricing, resulting in market length with nothing to support higher prices.

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