US PE exports inching toward pre-pandemic levels: Dow CEO

US polyethylene exports have nearly recovered to pre-pandemic levels despite logistics and supply chain snags, Dow Chemical CEO Jim Fitterling said June 2.

He said at an energy conference that US outflows have reached about 35% of domestic production, which is near the 40% that was moving out in March 2020 before COVID shutdowns pinched demand and squeezed outflows.

Exports had largely recovered by early 2021 when a deep freeze in mid-February forced widespread weeks-long petrochemical shutdowns, which left inventories depleted. PE producers also reduced exports through the summer of 2021 to restock ahead of August and September, which typically are the most hurricane-prone months.

The US exported 6 million mt of PE in 2020, and outflows fell 18% to 4.98 million mt in 2021, US International Trade Commission data showed.

In the first three months of 2022 the US exported nearly 1.48 million mt of PE, up slightly from 1.47 million in Q1 2021, and down 10% from 1.64 million mt in pre-pandemic Q1 2020, the data showed.

"It's been uneven, but we have been seeing improvement in the supply chain, our ability to ship out of the US," Fitterling said. "We're kind of back to March 2020 levels, which is, I think, a good sign."

Market participants say US resin exports have been stymied as an influx of containerized imports have commanded an already short supply of chassis and truck drivers to move containers. That has left packaged resin stuck in warehouses waiting to be loaded into empty containers and transported to ports to be loaded onto ships.

PE demand seen up to 1.5 times GDP

Fitterling said PE demand was still growing at 1.3 to 1.5 times GDP, and domestic consumption was seen up 7% to 8% from year-ago levels. That demand stems from packaging, lightweighting vehicles, plastic covering for cables in 5G infrastructure, construction and packaging for health and beauty products as workers return to offices.

He said higher energy and raw material costs were being passed to consumers. The company was watching those dynamics, particularly how long prices can stay at current levels and at what point prices siphon demand.

He said domestic PE price increases of 7 cents/lb for May and 7 cents/lb for June remain unsettled, and in Europe PE prices rose Eur50/mt in April.

Europe and Asia have seen production costs rise with crude and naphtha, as those regions largely depend on naphtha to produce ethylene feedstock for PE, while the US depends largely on cheaper ethane.

He said Asian PE margins "right now are under water" and Dow was watching to see how long Asian producers operate at negative cash margins and whether emerging from COVID shutdowns would increase domestic demand and boost prices.

He also said Dow has been operating PE plants in the 90%-plus range across its global operations. The company's project to retrofit one of its Louisiana crackers to add propylene cracking capability was on track to start up in the second half of 2022.

"It's basically in the finishing stages right now," Fitterling said, noting it would reach startup mode by the end of Q3 and begin production in Q4.

The project used Dow technology for a reactor based on fluid catalytic cracking, a mainstay of refineries for gasoline production. The 1 million mt/year, mixed-feed cracker in Plaquemine, Louisiana, to enable production of more than 100,000 mt/year of on-purpose propylene.