Polyethylene prices are moving up
Resins makers want 13¢ hike, market accepts 3¢
Tom Stundza -- Purchasing, 7/1/2009 2:16:06 PM
Polyethylene prices are moving higher again, driven by tight inventories, record exports and rising energy prices despite poor domestic demand and only a modest increase in ethylene costs, writes Michael Greenberg, CEO of The Plastics Exchange in a note to clients.
However, the spot-market's 3¢/lb price increase for polyethylene products--which brings high-density blow-molding material at 53¢--still leaves producers at least 10¢ below where they want prices to be. So, to keep the aborted price rally in perspective, average commodity polyethylene prices still are 60% lower than the 88¢ peak average price of September 2008.
Greenberg writes that "it has taken some time for the market to regain its composure after tumbling so hard during the latter part of 2008," noting that "the spot market is still shaken" by a severe drop in demand and an attempt by end users and distributors to reduce inventories throughout the supply chain. ICISpricing.com says there still is "no indication of significant domestic demand improvement."
That's why producers have kept operating rates throttled back so far this year as low as 70% of capacity and are managing inventories by operating on a strict make-to-order basis. "Producers have been very effective at managing supply," according to IHS Global Insight, which has revised its polyethylene price forecast upward to reflect expected demand improvements, rising feedstock and higher energy costs in 2010.
See also: Weary buyers keep polyethylene supplies lean despite low prices.
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