US polyethylene contracts rose 4 cents/lb in February after producers were successful in implementing the hike that had been anticipated since the end of 2013, market sources said.
Producer sources had expressed confidence in obtaining the increases since they were first announced and maintained that belief throughout the month. Solid domestic demand coupled with some allocations and force majeure events brought on by winter weather and logistical issues proved to be key factors in pushing the increase through, sources said.
With the settlements, February high density polyethylene contracts were assessed for blow molding at 83-84 cents/lb ($1,830-1,852/mt) for delivered railcars; for injection at 83-84 cents/lb ($1,830-1,852/mt) for delivered railcars; and for high-molecular weight film at 86-87 cents/lb ($1,896-1,1918/mt) for delivered railcars.
February domestic low density polyethylene contracts were assessed at 92-93 cents/lb ($2,028-2,050/mt) for delivered railcars, while linear low density polyethylene contracts were assessed at 79-80 cents/lb ($1,742-1,764/mt) for delivered railcars.
One producer -- Dow Chemical -- is pushing for a 6 cents/lb increase in March, for all grades of PE, while three others -- Ineos Olefins and Polymers USA, Equistar Chemicals, and Chevron Phillips Chemical -- were heard pushing for a 6 cents/lb increase in April, letters sent to customers said.
Multiple sources said they were expecting contracts to roll over in March, while reaction to producers being able to push all or some of the increases through in April has been mixed.
A buyer source noted that many customers took on large orders in December and January to get ahead of potential increases, and many of those may have to come back to the market in March and April to restock inventories. Strong demand in those months could give producers added ammunition to raise prices again.
A US-based trader source noted that the increases have also found their way into the tight spot market during January and February, an indication that domestic demand could be strong enough to support higher prices.
The market was keeping a close eye on feedstock ethylene costs, with some expectations that contract prices could fall by a cent once February business is concluded. Sources have said it is too early to know what March will do, but additional decreases could make it harder for PE makers to justify a price hike when margins are already expanding.
