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

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