Polyethylene prices are moving up this month as suppliers are aiming to implement their Sept. 1 increases of 5¢/lb. Suppliers have attributed earlier attempts to increase prices to tight inventories across the board, particularly for HDPE. The situation became more drastic when HDPE production difficulties resulted in three suppliers—Formosa, ExxonMobil, and Lyondell—declaring force majeure, meaning that customer deliveries could be restricted.
Ineos, too, sent a letter to its customers stating that it will be on “order control,” effective immediately, due to the “extreme tightness in the HDPE market and the subsequent force majeure actions.” The company noted that it is now “quite apparent that the September price increase of 5¢/lb for HDPE will be fully implemented by Ineos and the PE market.” There is another 5¢ increase pending for Oct. 1, but Ineos and others say it’s too early to discuss it with customers but they intend to pursue it.
How do these actions affect the PE market? Mike Burns, v.p. for PE at resin purchasing consultant Resin Technology, Inc. (RTi), and Michael Greenberg, CEO of The Plastics Exchange, wager that the HDPE force majeure actions and Ineos announcement will bolster suppliers to not split the price hike as they have done before, and that prices for LDPE and LLDPE will be under pressure, as well. They agree that all PE markets have been tight, despite suppliers running plants at operating rates at over 90% of capacity since March.
Preliminary data indicate that August may be the strongest month in PE sales, perhaps due to processors restocking ahead of higher prices. However, these industry sources also see the start of a slow improvement in suppliers’ inventory levels. Burns estimates inventories are now at 34-35 days, vs. under 30 days for most of the year to date. Commenting on spot PE prices at the start of September, Greenberg noted indications of widespread material availability, so long as buyers were willing to pay the 5¢/lb hike. At end of last week he reported that PE inventory offers not reflecting the full price hike were quickly gobbled up, and by the week’s end fresh material started to show up carrying higher prices.