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Is this year-end going to be different for US PE exports?

by Esra Ersöz -
  • 29/10/2020 (08:03)
Since the end of August, US PE cargoes have been almost absent in major spot markets due to the disruptions in production in the aftermath of hurricanes. The lack of this mainstream origin has contributed to the consecutive gains in Asia and the Middle East while its absence also kept the softening in check in Europe through September and October.

Jan-Aug US PE exports already at a record

According to ChemOrbis data, the US exported a record amount of PE in the first eight months of 2020, right before the hurricane season wreaked havoc on the production plants. Around 7 million tons of PE were exported in this timeframe, up more than 1 million ton or 21% when compared to the same period last year.

Once revealed, September statistics will show the degree of how the hurricane-driven shutdowns scathed exports.

Current production status

According to Resin Technology Incorporated’s (RTI) weekly market driver report, weather issues are fully resolved at ethylene plants and current ethylene production is exceeding PE demand. As a reflection of this situation, there is an influx of deep sea ethylene cargoes already offered to China, weighing down on ethylene pricing in Asia.

On the downstream side, there was also a long list of PE shutdowns in September, dragging on to October. These plants have almost fully returned to normalcy, as well. You can check the latest ChemOrbis PE Production News to see details.

How about PE exports? Any coming pressure from returning production?

According to sources, PE exports out of the US continued to be weak. Inventories are still low across North America and there has not been much active trading yet.

Players across Asia, Europe and the Middle East also confirm that there are not many US offers heard, let alone at competitive prices as was the case at these times in previous years.

Will US PE cargoes not flood markets this year?

Following the start-up of massive capacities in the US in the past three to four years, US PE was largely unleashed as a part of destocking activities before the year-end. A plethora of PE cargoes were offered across the globe aggressively during October, November and partly in December in the previous years.

Players are now widely pondering whether this will be deferred this year following the delayed restarts and low stocks inside the country, particularly when a new storm, Zeta, strengthened into a Category 2 hurricane Wednesday as it approached the Gulf Coast. If Zeta strikes Louisiana, where LyondellBasell and Sasol host ethylene crackers and PE units, it would be the fifth named storm to do so this season, setting a record for the state.

One caveat to keep in mind, however: Markets are quite edgy

Even though US PE stocks are still not high to spur a traditional year-end downturn, demand is fragile in global markets in the thick of the pandemic. Now that US PE plants are largely back to production, a possible improvement in US supplies is set to come at a time when demand is already losing pace across the globe.

Export PE offers from the US are assessed slightly lower this week, therefore.

In China, the high season has almost finished and players feel the peak is near for HDPE and LLDPE prices as resistance is growing to the uptrend which has been in place since bottoming out in late March. In Southeast Asia, another major destination for US PE exports, demand has already been quite weak, struggling with soaring COVID-19 cases.

The scene in Europe is not much different. After the markets followed a steady to soft trend in September and October, sellers voiced their intention to hike their November PE offers last week, particularly drumming up support from the lack of US cargoes. However, concerns about a second-wave coronavirus outbreak are casting pall over demand and hike targets are found highly debatable.

What happened back in Q4 2018 and 2019?

Let’s remember how US PE prices evolved in the last quarter of the previous two years in two major markets, Southeast Asia and Turkey, where ChemOrbis publishes weekly indexes for US origin PE prices.

In 2018, it was November when the downturn literally kicked off, while it was October in 2019 with the downtrend standing out earlier.

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