Daily Chemical Reactions

Abracadabra! – Is US Contract PE Price Support Based On Reality Or Wizardry, Hopes & Prayers?
November 30, 2023
Commodities Mentioned:
Plastics (PVC, PP, PE, PU, PC, PET, etc.), Clean Energy Minerals, Carbon Dioxide, Hydrogen, Natural Gas/NGLs, Crude/Naphtha
Companies Mentioned:
Nova Chemicals, Chevron Phillips Chemical, Dow, LyondellBasell, ExxonMobil, Baystar, Phillips 66, Ineos, TotalEnergies, Shell, Mitsui Chemicals, Tronox, DIC, Posco, TC Energy, SABIC, Aekyung Petrochemical, Jera, Technip Energies, John Cockerill, BP, Occidental Petroleum, Titan Group, Sun Chemical, Versalis, Braskem, Enterprise Products, BASF, Origin Materials, Ford, GM, VW, Tesla, Orsted, Elliot, ACWA Power, Trane Technologies, Brooksfield, Oceaneering

Daily Chemical Reaction

Abracadabra! – Is US Contract PE Price Support Based On Reality Or Wizardry, Hopes & Prayers?

Key Points

  • Global polyethylene (PE) spot prices have declined in 4Q23, putting downward pressure on US export prices and US contract reference premiums, signaling a needed non-market adjustment.
  • US contract reference PE prices are elevated relative to US spot levels in 2023, notably higher than pre-COVID premiums. Net transaction prices are mostly in-between – buyer visibility is low.
  • The North American PE production cost advantage is significant compared to Europe and Asia, suggesting a “less bad” profit setting amid global oversupply at the expense of many abroad.
  • We discuss the Phillips 66 response to Elliot, recent movements in crude oil values and Ex-US naphtha relative to US natural gas and USGC ethane, and many other relevant feedstock trends.
  • The sustainability section research targets views and takeaways from COP28, and downstream demand section targets falling Western inflation, but not below China’s, among other items.

Exhibit #1: US contract polyethylene (PE) price premiums remain elevated relative to 2019.

Source: Bloomberg, C-MACC Analysis, November 2023

See PDF below for all charts, tables and diagrams

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