Dwindling Demand Casts a Pall Over the US HDPE Market in December 2023

In the initial half of December 2023, the HDPE market experienced a decline in Western markets, especially in the US. This drop in prices can be mainly attributed to the weak demand for HDPE globally and sufficient stock availability. The decrease in the costs of feedstock Ethylene and upstream Crude oil in the region has also contributed to the downward trend in HDPE prices. Further, geopolitical tensions in the Middle East, disruptions in the supply chain due to low water levels in the Panama Canal, and an attack by Houthi rebels, affecting transportation in the Red Sea amidst an economic slowdown, have collectively influenced market dynamics during this period and influenced pricing of HDPE.

The US HDPE market showed a downshift as the demand from the downstream packaging and construction industries remained sluggish during the first half of this month. However, the feedstock Ethylene has been fluctuating as the market activity improved before the holidays, and upstream Naphtha continued to decline amid easing Crude oil prices. Further, the first week witnessed healthy market activity, characterized by the usual continuous customer order flow for HDPE. On the other side, some purchasers remained resolute in minimizing their buying activities towards the year-end, optimistic that December deals might extend into January while the export demand exhibited stability in Europe and Latin America. Sellers were receptive to reasonable bids, leading to lower prices in exchange for larger volumes, though within certain limits on the extent of discounting, which overall led to the price decline of HDPE in the USA. Moreover, the energy sector sustained a decline, with Crude Oil's continuous drop which has overall impacted the production costs for the HDPE. Furthermore, the United States, being a significant exporter of HDPE to Asia, has experienced shipment delays due to restrictions in the Panama Canal caused by low water levels. While there hasn't been any mention of the Suez Canal affecting US shipments at present, the situation could evolve if congestion at the Panama Canal intensifies, leading to additional delays in HDPE shipments. 

As per ChemAnalyst, the HDPE prices are expected to depreciate further by the end of the year as the demand is relatively low and traders are offering discounted prices to destock the material by year-end. Further, the ease in the cost of Ethylene and upstream Naphtha might impact the price trajectory. However, the HDPE price is expected to rebound in January as the demand may increase while the freight charges are expected to rise amid shipment congestions in the Panama Canal. Further, if the Red Sea and Bab-el-Mandeb Strait remain unnavigable for an extended period, and the wait times at the Panama Canal continue to increase, exporters may be compelled to consider an alternative route around the tip of Africa. Navigating around the Cape of Good Hope route would add significant distance and time to maritime journeys. This alternative could pose logistical and economic challenges for exporters due to increased fuel costs, longer transit times, and potential disruptions associated with the extended voyage.