US polyethylene, ethylene exports retreat as demand weakens, prices decline

US polyethylene and ethylene exports have begun retreating after a surge driven by Middle East war disruptions that positioned the country as a leading global supplier.

The pullback in exports marks a notable shift from the previous surge in buying activity to a period in which global players, having secured ample material in recent months, are increasingly reluctant to purchase additional volumes.

According to the latest American Chemistry Council data, North American linear low-density polyethylene (LLDPE) exports saw the sharpest decline in April, dropping 10.2% from the previous month after rising 24% in March from February, low-density polyethylene (LDPE) exports decreased 6.7% in April, following a 2.2% climb in March, and high-density polyethylene (HDPE) exports dropped 3% month over month in April, after rising 18.3% in March from February.

"I think May numbers should elevate the [export] deficits even more," a trader based in the US said June 1. "Things started to slow in the second half of April, but came to a halt in May."

This contraction in exports was reflected in US polyethylene prices, which declined after a war-driven rally peaked in mid-April, as demand destruction and increased competition from Chinese offers reversed the sharp increases that followed the closure of the Strait of Hormuz, according to market participants.

The price drop underscores a significant shift from panic-buying seen in March and early April, when the US became the primary supplier to Mexico, Latin America, the EU, Asia, and Africa amid disruptions to Middle Eastern supply routes.

According to Platts, part of S&P Global Energy, HDPE blow-molding grade prices peaked at $1,764/metric ton FAS Houston April 16, rising $926 since Feb. 25 — the last assessment before the Middle East war began. LLDPE butene grade and LDPE reached their highest level April 15 of $1,797/mt and $1,907/mt FAS Houston, respectively. These represented increases of $926 for LLDPE butene and $860 for LDPE over the same period.

After these peaks, prices declined between mid-April and June 2, with LLDPE butene falling by $408, HDPE blow-molding by $375, and LDPE by $276.

Ethylene dynamics

While PE prices retreated from their April peaks, upstream ethylene followed a similar but fundamentally disconnected trajectory.

The main change in US dynamics came with a surge in exports, leading to higher terminal fees for spot export cargoes. The US share of global ethylene exports increased to 89.8% in March from 42% in February, according to data from S&P Global Commodities at Sea.

Over May, however, export demand was heard to be dropping, with expectations that the volume for June will decline further.

"We are already seeing less interest in US ethylene into Europe," said a shipbroker during the second half of May.

Platts last assessed ethylene FOB US Gulf Coast at 40 cents/pound June 1, down 8 cents from the 48 cents/lb peak reached May 4. The drop was partly due to a decline in domestic prices driven by high inventory levels and subdued derivatives demand, and partly due to decreased export demand following the reopening of crackers in Europe.

As export dynamics dominate the conversation for US ethylene market participants, a disconnect has emerged from both upstream and downstream markets, supported by wide production margins. Ethane prices have remained relatively stable, in contrast to other upstream markets, following an increase in production to meet surging export demand, while polyethylene's price increases have pushed the polymer further away from the monomer.

Market participants said this disconnect has meant little to no impact on ethylene prices from daily price changes in either direction of the supply chain. Some argue, however, that fundamentals still remain relevant amid high production rates from downstream markets.

"As long as PE is running full, you will maintain a healthy ethylene price," said an ethylene producer.