Is this the beginning of the end? The linked report that US traders are struggling to find export homes for incremental HDPE should not be a surprise given the significant price difference between the US domestic price and prices in other markets – Exhibit 1 in today's daily report. HDPE is the more fungible polyethylene, with both LLDPE and LDPE much more grade and application-specific. It is often the first polyethylene grade to spike in a shortage and fall when there is a surplus.
There is an interesting difference between the base chemicals markets and some of the other broad commodities and intermediates, and we have economic growth that is testing the capacity limits for many commodities and downstream products, but the overbuild in basic chemicals, most recently in China, is putting significant downward pressure on pricing, as we highlighted in yesterday’s Weekly Report. Capacity shortages in intermediates and some specialties, which are driving the investments we highlighted in today's daily report and which are a steady flow of news this year, are leading to some expanding margins over base chemicals in select areas where capacity has not kept pace with demand.