Slump in Demand and Rising Inventories Lower the HDPE Prices in the U.S. Market
 Slump in Demand and Rising Inventories Lower the HDPE Prices in the U.S. Market

Slump in Demand and Rising Inventories Lower the HDPE Prices in the U.S. Market

  • 06-Jun-2023 5:50 PM
  • Journalist: Sasha Fernandes

The US High-Density Polyethylene (HDPE) prices exhibited a lower trend in the first week of June 2023 due to the weakening cost support from the country's downstream packaging and construction segments. Meanwhile, the final HDPE discussions were attributed to various factors, including soft demand in the U.S. market's primary HDPE-consuming construction and packaging sector and soaring inventory levels amidst eased upstream Ethylene costs and fluctuating crude oil price trends across the globe. Nevertheless, the minimal packaging industry demand and fluctuating oil prices squeezed margins in Naphtha-dependent Europe and Asia while the U.S. and Middle East embraced cheaper Ethylene price advantages at the termination of May 2023.

The second half of 2023 is projected to experience an oversupply situation, which could be prolonged if a disruptive event like a hurricane hits the U.S. Gulf Coast, where HDPE production is concentrated. Industry sources have acknowledged that production in the second quarter of 2023 exceeded demand, resulting in sufficient stock levels that can help mitigate any potential supply disruptions.

Moreover, the HDPE prices in the regional market dropped again this week after remaining down for two consecutive months. The weakening demand can be primarily attributed to a slowdown in residential construction in the United States in Q1, and the latest improvement in the offers from the construction sector, despite high-interest rates, has not influenced HDPE prices this week owing to the ample stocks with enterprises. These market dynamics demonstrated the challenges for the plastics industry in adjusting the prices to shifting economic conditions and demand trends. The restrictive financial conditions led to the consumers' purchasing power leading to decreased activity in various sectors influencing HDPE price movement in North America.

According to the Bank of America forecasts and federal meeting at the termination of May 2023, there is an expectation that the U.S. economy may enter a mild recession in the H2 of 2023. The tightening of bank mortgage restrictions and existing tight financial conditions are expected to contribute to the current economic crisis. However, the discussion noted a moderately paced rebound following the recession.

According to ChemAnalyst, HDPE prices will drop in June 2023, owing to the anticipated slump in North American packaging industry orders amidst deteriorating consumer confidence and economic concerns in the region. Meanwhile, the lower upstream Ethylene prices also support the declining H2 of the Year trend. Conclusively, the HDPE prices are anticipated to decline due to ample availability of stocks and a slowdown in consumer spending in the construction sector of the North American region in the Q2 of 2023.

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