US PE sees hike attempts in SEA, Turkey; players remain wary.

Petrotahlil :Price increases started to be sought for October PE offers for US cargoes in Southeast Asia and Turkey, prompted by supply constraints in the Middle East and rising ethylene in the US. Players confirmed receiving higher US offers while some voiced their skepticism regarding the workability of the recent price levels. 

Hikes are supported by reduced availability from Middle East 

Middle Eastern PE allocations have been reduced since last week amid feedstock shortages from the oil giant, Saudi Aramco following attacks on its facilities in mid-September. According to Reuters, the company has fully resumed the operation levels of the pre-attack period.

Saudi Arabia-based PE producers declared lower running rates at the start of last week before their operations partially improved shortly after. A major producer unveiled notable increases of $40-60/ton for October to China in line with the uncertain quota amounts from the region. “Supply-driven price hikes for Middle Eastern prices - gave an upper hand to US sellers,” said a global trader.

Surging ethylene contributed to firming sentiment for US PE

Earlier this week, ethylene supplies in the US were reduced due to the impact of tropical storms earlier on feedstock facilities in southeast Texas. Olefin supplies from LyondellBasell, ExxonMobil, INEOS and Chevron Phillips were hit by heavy floods following Storms Imelda and Jerry. 

Accordingly, spot ethylene prices in the US started rising last week due to offline olefin capacities, although they have recently erased early week gains on fading impacts of floods. 

This naturally found reflection on downstream markets. Even before the surge of spot monomer prices, some PE producers lifted their domestic offers for all PE grades by 8 cents/lb ($176/ton) effective as of October 1 in North America.

Higher offers show up for US PE in main export destinations

This week, traders in Singapore have reported receiving higher prices for deep-sea American PE cargos. “Some Middle Eastern sellers postponed their fresh offers to Asia until after Chinese Golden Week festivities. This coupled with higher spot ethylene costs paved the way for rising US PE offers,” a trader commented.

Both buyers and traders in Turkey also affirmed that American HDPE offers posted visible increases for new shipment cargos this week. “We did not hear many offers for LDPE and LLDPE, while HDPE film and blow moulding offers were up on the heels of limited material,” said a packager.

Will reduced supply from Mid-East manage to eliminate PE glut? 

Although global PE markets are likely to be supported by supply issues over the near term after sinking to a more than a-decade low in several regions, the extent or the sustainability of this firming is under discussion. 

Supply has already been long in PE markets due to the massive capacities built in the US. Trade-war driven slowdown in global economy also results in sluggish demand for PE cargoes. 

When Saudi PE production is ramped back up to normal, the firming will not have a leg to stand on, some players argue. 

Players take recent hike in US PE with a pinch of salt

“American sources adopted a firmer stance amid the absence of several Middle Eastern suppliers in Turkey. Nonetheless, the US owns large PE capacities following the recent additions, while producers are unable to sell to China due to higher tariffs, which stays as an obstacle,” highlighted players.

“The approaching year-end may traditionally trigger destocking activities across the board. Plus, demand in main export destinations of US PE may remain moderate along with persisting economic woes,” argued a player.

Eyes also on growing domestic supplies in China’s absence

Players are also keeping a close eye on China, where activities have calmed down starting from today due to the Golden Week holiday. Domestic supplies are expected to increase next week as producers will maintain their production. 

Whether demand in China will absorb growing domestic supplies and the market will manage to sustain its recent firming after the holidays is yet to be seen, which is to help determine the trend in global PE markets.