In recent months, it has been difficult to understand why North American converters pay the highest prices in the world. On this article, we will analyze the market fundamentals, and try to establish how North American polyethylene prices compare with the rest of the world.
From a supply standpoint, things are going well. By late 2021 the industry had solved the production issues that winter storm Uri created. Not only existing polyethylene assets were up and running; an additional 1.3 million metric tons of LLDPE capacity was successfully started up by ExxonMobil and Sabic in January of this year.
Exports, that dramatically decreased after the 2021 winter storm, have recovered but are still below what producers should be able to export. Figure 1 compares the incremental U.S. exports (versus their 2015-2016 level), to the incremental capacity in the region. As you can see, exports in March were still about 210 KT below what producers are able to manufacture in the region.
In fact, exports are still below their level in 2020.
One common justification for the high North American polyethylene prices (and the continued pressure to increase them) is that domestic demand is strong. Market participants with access to ACC’s statistics indicate that polyethylene sales in March reached their highest level of the year. However, they also indicate that March sales were in line with peak monthly domestic sales for all three polyethylene products, and that those peak levels are typically not sustained for prolonged periods of time. One additional factor that was also helping producers push for higher polyethylene prices, the railroad logistics congestion in North America, is starting to get resolved.
Finally, we are starting to hear reports that polyethylene slated for exports is making its way to domestic consumers. Exporters are leery of depleting inventories for committed export sales, but with warehouses filled to capacity, it appears that some material is backing up into domestic markets.
So, even though market fundamentals would seem to indicate prices should start to move lower, they haven’t as of yet. As a result, North American converters are paying the highest polyethylene prices in the world.
Is Your Price Right?
How much more are converters paying? The following table, prepared with data from USA Trade Online, gives you an idea. It compares the average price for exports into North America (Canada & Mexico) with exports to South & Central America, Europe and Asia. As you can see, on average, North American converters paid 10 to 20 cents per pound more for polyethylene from the U.S. than their South American, European or Asian competitors. And, before you ask, it is not because of the high transportation costs between the U.S. and those destinations. Currently, it costs a U.S. producer 3.27 cents per pound to ship polyethylene to Peru, 0.62 cents per pound to Antwerp, 0.97 cents per pound to Shanghai and 4.40 cents per pound to Singapore (as quoted by Hapag-Lloyd on May 9, 2022).
So, it is clear that North American polyethylene prices are the highest in the world. If you are curious as to how you’re the price you pay for polyethylene compares with how much export clients are paying, we have prepared the following file. It provides you with the average price of U.S. polyethylene exports by country of destination, as well as the total volume of polyethylene that was exported. The data was sourced from the U.S. International Trade Commission. We look forward to hearing how your prices compares with converters around the world!