Polyethylene prices march ahead by 7¢/lb

Market insiders don’t see further 8¢ hike sticking

by Tom Stundza -- Purchasing, 7/23/2008 10:49:00 AM

Polyethylene market prices increased by an average 7¢/lb in July, but purchasing was spotty and few buyers expect another 8¢ increase to stick in August. In fact, the July hikes could crumble in August, buyers tell subscription news service ICISpricing.com, if crude oil prices continue to slide.

Producers took a firm stance on the 7¢ July increases as their ethane costs rose dramatically on the back of record-high crude oil prices in June and the first half of the July. However, oil prices have been sliding and lower-priced secondary material has been cropping up in distribution channels. So, market sources say purchases of linear low density polyethylene (LLDPE) grades for next month’s delivery actually are happening closer to June price levels.

Atop that, some processors didn’t see higher prices in July because they didn’t buy. Any resins. They had anticipated the July-August hikes and had stocked up beforehand.

Some suppliers have been citing American Chemistry Council inventory data, which shows that stocks have dropped 600 million lb, or about 20%, since the beginning of 2008, to support the higher prices. However, domestic demand is down this year and market insiders tell ICISpricing.com that exports are declining in July, which should reverse the trend of falling inventories.