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Dow confirms November PE price decrease, pushes for 5-cent/lb hike in January

Houston — Dow Chemical has settled its November domestic polyethylene contract pricing at a discount, but is adding a proposed January hike to its previously announced December increase, the company said in a letter customers obtained Tuesday by S&P Global Platts.

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Dow's November discount for US contract PE buyers came to 3 cents/lb ($66/mt), the December 3-dated letter said, in line with decreases previously confirmed by market participants.

The company is proceeding with a previously announced December hike of 3 cents/lb while also announcing plans for an increase of 5 cents/lb ($110/mt) that would take effect January 1, 2019, the letter states.

The contract price adjustments apply to all grades of PE that Dow sells in the US, the letter confirmed.

No other US producers were heard issuing similar adjustments or communications with domestic buyers, although most -- if not all -- were expected to follow suit, sources said Tuesday.

Contract buyers in the US last week were heard settling November pricing with a discount of 3 cents/lb from all major US producers, sources said. This came after a proposed hike of 3 cents/lb was rejected in October and rolled into November, leading to stable pricing to open the fourth quarter amid weak demand.

That dynamic has not changed so far in Q4, with domestic US buyers heard taking contract minimums and making up the stock difference with spot volumes at discounts of 5-6 cents/lb ($110-$132/mt), sources have said.

US producers have found little relief in the export market, with ongoing US-China trade tension closing off much of the Far East's concentrated demand for regional traders and producers alike.

Other key export markets such as Mexico and South America have also taken note of current market dynamics and adjusted import strategies accordingly, with buyers taking advantage of lower prices but doing so with a conservative approach. Rather than restock at the first sign of significant discounts on US-origin PE, buyers in these Latin American markets -- which are often referred to as relief valve for US exporters -- have taken a "hand-to-mouth" approach while waiting out a price floor.

The result has been US export pricing falling to lows not seen before by many in the market, with the seasonal destocking efforts typically seen in November and December also applying pressure. So far, US export PE pricing has fallen off sharply since peaking at $1,312-$1,489/mt in the first quarter of this year, with weak demand serving as the primary driver.

High-density PE export pricing in the US is down between 23.2%-31% since Q1, with blowmolding grade showing the biggest dropoff, while low-density PE export pricing has come off by 33.1% during that same time. Linear-low-density PE export pricing out of the US, meanwhile, is down between 27.8%-35.2% from Q1 through this week, with the more commonly consumed butene-grade LLDPE showing the strongest decline.

Domestic HDPE contract prices were last assessed Wednesday at 63.5-64.5 cents/lb ($1,400-$1,422/mt) for blowmolding and injection grades, while film closed at 66.5-67.5 cents/lb ($1,466-$1,488/mt). Domestic LLDPE butene contracts were assessed at 61.5-62.5 ($1,356-$1,378/mt), while LDPE contracts closed at 75.5-76.5 cents/lb ($1,664-$1,686/mt).

All November Platts US PE contract assessments were down 3 cents/lb week on week after holding stable in October and rising 3 cents/lb in September. The assessments are made on a delivered-rail car basis.

--Phillipe Craig, phillipe.craig@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com