North American PE And PVC Producers Are Looking For An Export Market To Maintain Their Margin

U.S. Polyethylene Exports Are Increasing, Following The Easing Of Shipping Restrictions And Logistic Constraints

Polyethylene producers in the U.S. since late last year, as well as into Q1 of 2023, have been looking into export markets in an unprecedented manner compared to the pandemic and post-pandemic periods, after the relaxation of shipping and supply chain concerns, but even as gross profit overseas is not as appealing as the product ones sold in the U.S. itself.

According to Chief Financial Officer of Westlake, Steve Bender, during a discussion over the recent company profits, more frail demand led them to shift most of their North American polyethylene and PVC resin sales volumes overseas, where netbacks and pricing were under their standard domestic market channels.

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Confronted by way more polyethylene capacity in North America during the present years, including Pennsylvania's 1.6 million tonnes per year polyethylene plant that began operations a year ago that will catch a glimpse of full running rates in 2023, a few plants have reduced running rates, or pursue alternatives to lower costs.

These currents were partly offset due to higher polyethylene production and sales volumes, as per Bender.

LyondellBasell and Celanese officials also reported improved export attention amidst a surplus in output. Producers of resin in the U.S. expect a return of resin demand growth in China to help bring the latest capacity added in current years.

Weak Demand In The U.S. Hurts Resin

Building and construction markets in the U.S. were seriously affected by growing interest rates and housing that began plunging by about 22% year-over-year in December, as per officials at Westlake.

The average PVC and polyethylene selling prices sharply dipped in the fourth quarter, according to the company.

In PVC resin's case, the de-stocking of consumer inventory resulted in regional sales volumes declining more rapidly compared to the end-use demand levels, as per Bender.

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A few of the converters of plastic resin commodities that during the period of Covid and post-pandemic had stored huge stock volumes, in anticipation of potential supply-chain issues, in Q4 of 2022 only lowered their inventories. This harmed demand and prices.

Demand Recovery Following De-Stocking

According to the chief operating officer at Westlake Chemical, Roger Kearns, he thinks that the destocking that they talked about, they felt it rather hard in PVC and polyethylene, both on the regional U.S. market.

So, they transferred a huge quantity of their material in the fourth quarter to the export markets. And what they are witnessing in the first quarter is, according to him, a recovery to slightly more normal numbers that they would see. So, he thinks so far through January and February, they're seeing a slight recovery on the regional side, directing to the market in the U.S.

The company is striving for an accumulative aggregate of around 10 cents per pound increase in the price of PVC resin in Q1 of 2023.

Regarding the polyethylene price direction, the president of Westlake, Albert Chao, stated the company had an extra $0.03 to $0.05 a pound price announcement in February for attempting to recoup some of the price drops that took place last year.

Chao conveyed optimism about the recovery in levels of Chinese demand growth that preceded the Covid pandemic.

Lyondellbasell Had Plants At 75%

Westlake's Roger Kearns, commenting on operating rates, said they're seeing strong hopes for both PVC and polyethylene in Q1 on the back of North American advantage.

LyondellBasell's global olefins and polyolefins executive vice president Ken Lane, on company profits, stated that the company plants worked at a 75% capacity in Q4 of 2022 because the market demand lowered, and they also saw customer destocking during that period.

China’s Demand Growth Comeback

As per Lane, polyethylene demand view for the past two years in China has been fairly flat. So for 2023, based on historic data following two such years, it is expected that there will be a major snapback in growth, but it is uncertain. So it could be anything between flat to plus 8%.

Hence, it is a closely watched market since it is mainly the price that is in the market and will propel all the new capacity's absorption.

Celanese CEO, Lori Ryerkerk, stated that reductions in the prices of natural gas led to a decrease in the prices of plastic resins.

Buyers of Resin expected lowering prices, and they chose to draw down their inventory in expectation, as per Ryerkerk said.

In 2022, they saw a huge stock build because people were concerned about getting resin. Moving forward, they see that people feel the supply chain issues are mostly resolved.

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Adding to Shell's plant schedule for producing commercial, full-capacity rates in the present year of ethylene and polyethylene, other polyethylene and polypropylene-related investments have risen the supply in North America during recent years.

According to the Procurement Resource article, producers of PE And PVC In North America are trying to keep margins by looking for an export market. U.S. producers are aggressively looking into export markets after the relaxation of shipping and supply chain concerns despite the overseas margins being less attractive than domestic ones as the U.S. is experiencing frail demand for resin due to the lack of demand from the building and construction sector affected by growing interest rates and declining housing demand. On the other hand, Chinese demand is uncertain, with experts expecting either a major snapback in growth or a flat one.