US chemicals company LyondellBasell expects to be able to push North American polyethylene (PE) and polypropylene (PP) prices higher due to global polymer supply and feedstock disruptions caused by the Iran war, chief financial officer Agustin Izquierdo said today during the JP Morgan Industrials Conference in Washington, DC.
The company has announced a 10¢/lb increase for March PE contracts and another 10¢/lb increase for April PE contracts. So far, the proposed price increases have not had a negative impact on order books, Izquierdo said.
"10¢/lb is not scaring anybody," he said. "Still, we see a healthy number of orders in the books."
Prior to the start of the war, North American PE inventories were already at lower levels of around 37 days of inventory, Izquierdo said, adding that the market is usually balanced at around 45 days of inventory.
The lower inventory levels, combined with rising demand and higher prices for PE exports out of the US, should provide enough support for higher margins, he said.
"We have demand everywhere," Izquierdo said, adding that there is healthy demand for US product out of Europe, Latin America and Africa due to supply disruptions in the Middle East.
LyondellBasell is also seeking a margin increase of 10¢/lb for US/Canada April PP contracts, which Izquierdo said will be supported by increases in global propane costs and lower operating rates in Asia.
"We have an opportunity to start exporting out of North America," he said. "That is very leveraging for us."
For every $100/metric tonne (t) increase in integrated PE margins, the company said it sees a potential earnings increase before interest, taxes, depreciation and amortization (Ebitda) of approximately $320mn for North America and $280mn for Europe. For every $100/t PP margin increase over propylene, the company said it sees a potential ebitda increase of approximately $440mn for both regions.
