LLDPE Prices Hike in Europe and USA: Supply Shortages and High Demand Drive Surge

During the initial half of February 2024, there was a significant increase in the prices of Linear Low-Density Polyethylene (LLDPE) observed both in Europe and the United States. This escalation predominantly stemmed from supply shortages and heightened market demand. In Europe, constrained supplies exacerbated by delayed cargo arrivals drove the price surge, while in the US, increased demand from sectors such as construction and packaging propelled LLDPE prices upward. Further, the escalating costs of feedstocks Ethylene, along with upstream Naphtha and Crude oil, significantly impacted production expenses for LLDPE in both regions, intensifying the upward pressure on prices. Furthermore, disturbances in crucial pathways such as the Panama Canal and the Red Sea also played a role in increasing market instability during this timeframe, exerting added pressure on pricing trends.

During this timeframe, the demand for LLDPE in the US market experienced a robust upward trend, resulting in sustained price hikes, notably a 6% increase for Film Butene-based grade FOB Texas (USA). Trading remained brisk, with participants actively engaged in spot market transactions due to limited availability. The upward trajectory of LLDPE prices was propelled by rising costs of Ethylene and Naphtha, exerting additional pressure on product expenses. Moreover, heightened export demand, driven by ongoing logistical hurdles, enabled producers to command higher prices for their products. This surge in export activity facilitated the reduction of excess resin in the domestic market, leading to tighter domestic supplies and subsequent increases in domestic LLDPE costs. These price escalations align with anticipated patterns, as international LLDPE prices surged with rising freight costs. The recent uptick in LLDPE spot prices has supported producers to advocate for another price hike in February, building on a successful increase implemented in January.

In Europe, the LLDPE market witnessed a 3% price hike for Film grade FD Hamburg (Germany), largely influenced by constrained supplies due to delays in cargo arrivals from the Middle East and limited material quantities from the US. This upward trajectory was further compounded by reduced output rates and regional shutdowns. Despite these challenges, overall demand remained relatively stable, marked by subdued activity in end-user industries, particularly the construction sector as housing activity has significantly slowed down in the region. Further, market participants in Europe encountered higher February offers from domestic producers, amid the increase in feedstock Ethylene prices. The scarcity of import alternatives and reduced allocations compelled suppliers to prioritize margin expansion, especially after enduring negative margins for several months. With the February ethylene settlement showing a modest uptick due to sluggish demand in January, the substantial price hikes pursued by LLDPE suppliers in February will significantly aid in recouping lost margins over recent months.  Moreover, market participants are directing their attention towards March, primarily involved in considerations regarding prospective feedstock Ethylene prices for the approaching month.