Why has polyethylene become so expensive ?

As a plastic packaging buyer, you've probably noticed the skyrocketing price increases and raw material shortages. Since the year 2000, the prices for polyethylene, the basic material for LDPE, MDPE and HDPE films, have never been as high as they are today. Why so expensive?

 

Root cause

A combination of different factors is responsible for these extraordinary price increases.

Normally, the development of naphtha price largely reflects the process of derivatives such as PE and PP polymers and their end products such as B. packaging films. Occasionally, external influences such as B. Weather-related production interruptions or technical failures play a role. Likewise, a temporary imbalance between supply and demand can cause prices for plastic packaging and raw materials to vary up or down. At the moment, many factors are colliding and thus mutually reinforcing the influences.

Situation

• Naphtha and ethylene supply is limited due to lower oil production due to lower oil consumption (Covid) and the extremely low oil prices in early 2000    
• In view of the lower supply and the likewise lower overall demand, there are production cuts at polymer manufacturers.
• Unforeseen problems (force majeure) such as B. Start-up after maintenance of the machines at some production sites.
• Production disruptions at United States petrochemical plants due to extreme weather conditions.
• Disruptions in logistics given the global Covid situation.
• Massive increase in freight costs due to increased diesel prices.
• Through arbitrage by exporters, e.g. B. USA and Russia limited imports into the EU.
• Increased demand for certain polymers such. B. LDPE and LLDPE.

Forecast

The prospects are still uncertain. We must be prepared for further price increases in the coming weeks and months based on the naphtha price and market analyst forecasts. There are still a number of producers operating at reduced capacity. However, some production facilities are slowly starting up again. It is therefore to be expected that the scarcity of raw materials will continue for the foreseeable future. The current war in Ukraine and the associated ban on imports of Russian crude oil into the EU will further aggravate this situation and thus lead to further price increases.