The US LLDPE market remains stable despite volatility in the feedstock market

Linear Low-Density Polyethylene prices in US have been stable since the first week of March despite volatility in the feedstock Ethylene market. Unlike Asia and Europe, Ethylene prices in the US have been on a decline since 25th of February with prices assessed on the 16th of March being 21% lower. Spot Ethylene price stood at USD 645/MT as of the third week of March.

The cost pull from deflated Ethylene prices was offset by a significant rise in demand combined with exorbitant energy prices following the US decision to ban Russian oil and gas imports. Henry hub benchmark natural gas price has declined from a quarterly high of USD 6.7/MMBtu on the 2nd of February to USD 4.77/MMBtu on the 21st of March, FY 22. This had led to a decline in the prices of NGLs including ethane and propane.

LLDPE demand had been robust since the beginning of the new year with spot volumes seeing a sharp rise in the first week of March as most buyers resorted to restocking of the resin material in expectation of higher future prices because of the war that broke out in Eastern Europe in the last week of February. Supply, however, remains constrained with supplier inventories remaining thin throughout the month of March. Export warehouses remained stocked up due to the unavailability of ship space.

The next couple of weeks could see prices of LLDPE film increasing sharply given the current trend of Natural gas price movement. Henry Hub benchmark price as of 23rd March stands at USD 5.23/MMBtu which means a likely increase in the prices of ethane and in turn the prices of ethylene monomer. The planned cost-push of USD 0.06/lb by producers for the month of April could further contribute to the price rise in the spot market. The resurgence of the pandemic in China could dent the prospects of exporters further given the fact that the US is one of the major exporters of the resin to the North-East Asian region.