PE market sentiment in the Americas points to a sales freeze after November

Polyethylene market participants across the Americas maintain a pessimistic outlook for demand in November, with several expecting prices to drop even further from their current market lows.

A Colombia-based trader said they expect a further $10-$20/metric ton decrease on most grades, characterizing the situation as a "typical end-of-year cycle." A couple of distributors in Paraguay also foresee another downward adjustment in imported material from the US, which the regional producers will have to follow to close sales.

Sources both in Brazil and the US continue to see downward pressure in prices from market fundamentals, especially on the supply side. Some are even suggesting that only a cut in production rates in North America could prevent this trend. However, a trader source based in the US disagreed, saying that "the oversupply is no longer an issue. Prices have bottomed out. I don't expect any further adjustment on prices."

Platts, part of S&P Global Commodity Insights, last assessed US blowmolding, high-density PE at $750/metric ton FAS Houston Oct. 30, a $33/mt drop from the first assessment of the month. Domestic Mexico City, CFR Brazil, CFR West Coast South America and CFR Mercosur pricing for the same product similarly fell $25-$40/mt over the same period.

There are limited expectations for activity to significantly increase in the weeks following the start of November. The Mexican market is currently taking a wait-and-see approach as the month's negotiations for spot exports of US PE materials continue. In Brazil, traders are already avoiding acquisitions for end-of-November loading, as products are expected to arrive during the holiday season.

"The sentiment in the market is bad," a US-based distributor said. "Everyone wants to get rid of inventories for the last two months of the year." One of the Paraguayan distributor sources pointed out that, for resin buyers, "strong purchases are in November. By Dec. 8-10, everyone has bought all they need until February. [Regional producers] start their holidays by Dec. 15-20. Company owners as well, and they don't come back until Jan. 10."

However, in some markets, there is still hope from supply-side participants for activity to slightly pick up before the holiday period begins.

According to a US-based trader, several customers in WCSA are managing just 3-4 weeks of inventory. The timeframe isn't enough to arrive for a cargo from Houston to the main ports of the region in case of a sudden product shortage. However, local suppliers are said to have plenty of availability in case of prompt delivery emergencies for converters.

And in Mercosur, a distributor source said, "buyers will bet on buying enough PE from the US [over November] for it to arrive next year. And then, they would have saved a bit because Americans usually raise their prices at the start of the year."

Market remains vigilant of trade decisions

As the year started to close, participants entered a wait-and-see mode while monitoring the relationship between Washington and Beijing. Sources hope to assess whether the discussions may significantly impact the polyethylene market. At the same time, the uptick in US offers in Asia that began in early September was heard at a standstill.

The antidumping duty against US PE in Brazil also re-entered the spotlight. Initially, competitive pricing from the US meant that imports could still compete against regional PE, despite the preliminary tax of $199.04/mt implemented Aug. 29.

However, although foreign PE continues flowing to Brazil, sources that supply smaller customers in the spot market are starting to rely on different origins. These participants are alleging that US prices are not competitive once the AD tax is added, with one of them pointing out that "the value can be higher once it becomes definitive. How can we navigate through so many uncertainties?"