Polyethylene Prices Explained
Polyethylene prices are on negative levels as suppliers face weak demand from the derivative sectors. Additionally, the sluggish global economy leads to significant order reductions from end-user products. Furthermore, China still struggles with its ailing property sector which poses a big challenge to the polyethylene market as the country is the biggest producer and consumer of plastic.
However, the government’s move to bolster its domestic consumption and support its housing and infrastructure projects will likely contribute to the rebounding of polyethylene prices.
Why are polyethylene prices fluctuating?
1. Raw Material Costs
Polyethylene is manufactured from ethylene (which comes from petroleum). Thus, its price varies according to the availability of its main feedstock. Moreover, any serious changes in ethylene prices impact polyethylene prices as fluctuations in the prices of these feedstocks directly affect the cost of producing ethylene and polyethylene.
Furthermore, security concerns grow increasingly as tension in the Red Sea causes the rerouting of passing merchant vessels which impacts freight and polyethylene production costs.
2. Supply and Demand
Like any other commodity, the demand for polyethylene fluctuates based on various factors such as consumer preferences, industry needs, and economic conditions. For example, the increasing demand for food and beverages on a global scale will drive the demand for polyethylene.
As the world’s population continues to grow, the food and beverage demand expands, influencing the need for polyethylene and its prices.
3. Production Costs
Oil and gas production growth rates will change the demand for oil and gas pipes. The cost of energy, including electricity and natural gas, is a significant component of polyethylene production costs. Additionally, variations in energy prices influence polyethylene production and market prices.
Weather can cause fluctuations in polyethylene prices by interrupting production, influencing supply chains and raw material availability, affecting energy costs, and shaping consumer demand. These impacts stem from weather-related events which lead to polyethylene prices within the production and market dynamics.
Which variables impact the price of polyethylene?
- Raw Material Costs
- Supply and Demand
- Production Costs
- Global Economic Condition
- Currency Fluctuation
Where does polyethylene come from?
Polyethylene is a thermoplastic polymer produced from the monomer ethylene. It is sometimes called polythene when used for HDPE pipes.
With a high strength-to-density ratio, polyethylene is used in the production of plastic bottles, chemical containers, toys, and piping systems. Additionally, it is commonly recycled and has the number “2” as its resin identification code.
The most common method for manufacturing polyethylene involves the catalytic polymerization of ethylene. Here are the basic steps involved in producing polyethylene:
1. Ethylene Production – Ethylene serves as the primary precursor for polyethylene manufacturing and usually comes from petrochemical feedstocks like crude oil or natural gas through methods such as steam cracking.
2. Polymerization – ethylene molecules are joined together using a special catalyst in a high-pressure reactor. Then, the catalyst starts a reaction that links the ethylene molecules, creating long chains of polymer, which is polyethylene.
3. Polymerization Conditions – the polymerization process is conducted under specific temperature and pressure conditions. It is usually between 1000 to 3000 atmospheres and temperatures within the range of 120 to 300 degrees Celsius.
4. Polymerization Reaction – when catalyzed under appropriate conditions, ethylene molecules undergo a polymerization reaction. Furthermore, the double bond in ethylene is broken, enabling the carbon atoms to create new bonds with other ethylene molecules, giving rise to the creation of polyethylene chains.
5. Polymer Processing – the polyethylene resin formed in the polymerization reactor is processed to achieve the desired polyethylene properties. This involves cooling the polymer, pelletizing it, and adding stabilizers to improve its characteristics.
6. Quality Control and Testing – the polyethylene pellets go through rigorous quality control assessments to verify adherence to specific standards and desired characteristics. Additionally, these assessments include factors such as density, molecular weight distribution, melt flow rate, and other essential parameters.
7. Packaging and Distribution – the final polyethylene resin is packaged and distributed to various industries for further processing into a wide range of products.
What is the future price of polyethylene?
Polyethylene’s outstanding properties such as tensile strength, resistance to moisture, chemical resistance, and low cost make it ideal for various end-user industries. While the commodity’s price hangs on lower levels, polymer market experts see an uptick in its price as freight rates of delivered petrochemical imports show a rising trend, leading to an increase in polyethylene prices, particularly in Europe.
Additionally, the U.S. polyethylene exports to China doubled yearly as the American shale gas boom resulted in a diverse market. However, Shell, Bayport, and Nova’s polyethylene expansion plants in North America mean a crowded market in the coming years which can stabilize the U.S. PE (polyethylene) exports.
Furthermore, the APAC (Asia Pacific) market will experience competition as China plans to produce 8 million tons of PE capacity online while India and Vietnam prepare to start new PE plants. Anticipating the future, the market will attain a value of around $146.20 billion by 2030, exhibiting a CAGR of 4.1% during the forecast period and polyethylene prices will remain elevated in 2030 at $1,200 per ton.