Price Increase for Polyethylene is Slipping Away in March.

Domestic Linear Low Density Polyethylene (LLDPE) hexene contact pricing remained unchanged for the month of February. Flat pricing was a highly contested result for the month as producers were pushing for a $0.03 to $0.05 increase, pointing to modestly improved demand and constrained production in the first two months of the year. However, ample inventory across the supply chain remained the dominant factor giving buyers the ability to push back on proposed price increases for the month.

Understand, producers are not giving up on their plans for an increase. Instead of canceling proposed February increases, they have moved their increases to March, and those increases are now between $0.05 and $0.06. On paper, producers’ insist the increase is needed because of higher demand domestically, and specifically high demand in exports to Asia and Latin America.

Behind the scenes we know operating margins at these producers are at a ten year low. Like any business in the past two years, resin producers have been hit with high inflationary increases in people, plant, and equipment. At the same time, an unprecedented amount of new capacity and production has hit the market driving costs lower. This situation has left producers in an almost desperate, relentless effort to push for future increases in the face of present market dynamics. There is 50% chance market fundamentals may line up in producers favor in the month of March. Our reasoning is focused on inventory.