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Bi-Weekly Plastics Report - July 8, 2026

By: Alex Hodes, Energy Analyst - KC Energy

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Polyethylene (PE)

  • U.S. polyethylene prices have yet to settle in June but expectations are for lower pricing. Supply continues to be strong in the U.S. and exports appear to be slowing. 
  • Feedstocks have not been supportive of PE pricing and the environment ahead does not suggest that this will change. 

Supply

The supply side is approaching oversupply with US and Canadian PE production increasing from 5.64 billion pounds in April to 5.81 billion pounds in May (+2.9%). Operating rates are still extremely strong and is up 10.3% from the same time period in 2025. Inventories built from 42 days to 53.8 days in May - showing the largest monthly inventory builds on record. LLDPE supplies are healthier than other grades and production is particularly strong in this grade. 

Demand

Domestic PE demand remains relatively healthy, but the bigger question is export demand which has been under pressure. April Canada and USA PE exports fell 6.6% from March to 2.65 billion pounds, and May ACC export data showed another decline, with exports down 13.7% from April to 2.13 billion pounds.

Asian demand remains on the sidelines. Mainland China’s PE exports surged during the first five months of 2026, and in May China exported more PE than it imported for the first time on record. This shift disrupted global trade flows and reduced the need for buyers in Latin America, Europe, and Asia to chase North American material at elevated levels. Asian-origin offers have been available at meaningful discounts, and buyers globally have been delaying purchases because they expect further price declines.

Demand destruction is also appearing in downstream markets. Converters are buying hand-to-mouth, some are consuming high-priced inventories built during the war-risk rally, and many are struggling to pass through elevated resin costs to end buyers. Latin America and Europe both show the same pattern: lower prices have not yet stimulated aggressive restocking because buyers believe prices could fall furthe

 

image-20260708101742-1

Data Source: American Chemistry Council, Chemical Market Analytics by OPIS *Forecasts shaded in yellow

image-20260708101859-2

Data Source: American Chemistry Council, Chemical Market Analytics by OPIS *Forecasts shaded in yellow

Feedstocks

Ethylene costs have been mixed but there are reports of outages in July before more ethylene capacity is expected to come online later in the year. Ethylene markets remain long though even with the cracker outages. North American producers still retain a structural feedstock advantage versus naphtha-based producers in Europe and Asia. However, that advantage is now being offset by weaker global demand, falling export netbacks, and rising domestic inventories. In other words, feedstocks help margins, but they are not enough to defend resin prices.


Price Outlook

PE contract prices are expected to move lower with spot prices falling for 10 consecutive weeks. The near-term outlook is bearish as the market faces a combination of high production, elevated inventories, and weak global demand. Upside price risk does still exist and the recent attacks on vessels in the Strait of Hormuz is elevating price risk ahead. The EU’s removal of tariffs on U.S. PE imports could help North American exporters into Europe, but it is unlikely to fully offset the broader global oversupply.

Polypropylene (PP)

  • Polypropylene prices moved lower in June once again - down 8.5 cpp, following PGP lower. 
  • Polymer-grade-propylene (PGP) prices moved lower on the month and the supply and demand picture appears healthier than before. An increase in PDH rates in China will likely weigh on PGP pricing ahead but could be prone to upside price risk if the Strait of Hormuz flows are disrupted again. 

Supply

North American PP supply has eased with production moving higher in May and operating rates moving up slightly. Inventories have continued to build and moved up from 34.2 days in April to 38.9 days in May. Producers are keeping rates elevated but not running full bore. Planned maintenance in August and September should provide some support to effective operating rates, but the overall market no longer looks short. Supply is adequate, and the risk is that production continues to outpace demand.

Demand

Domestic demand is steady but has not been enough to outpace supplies. Exports remain important but are starting to slow. April exports were up 2.6% from March and year-to-date exports were 60% above 2025 levels. However, exports are expected to remain elevated but off their Q2 peaks. North America benefited when Middle East supply was constrained, but mainland China filled more of the global gap than expected. As Middle East production recovers and Asian prices remain competitive, North American PP exports should face more pressure.

Mexico demand was also soft in May and June. Buyers have been quiet for two consecutive months, managing high-priced inventories from the rally and waiting for lower resin prices. Distributors reported low sales throughout June and avoided building inventory due to the still-wide spread between PGP and PP prices.

image-20260708102429-4

Data Source: American Chemistry Council, Chemical Market Analytics by OPIS *Forecasts shaded in yellow

image-20260708102222-3

Data Source: American Chemistry Council, Chemical Market Analytics by OPIS *Forecasts shaded in yellow

Feedstocks

Polymer-grade propylene (PGP) has been a big driver for PP pricing but we saw a drop in pricing by 8.5 cpp - and PP prices followed. PGP supply is healthier than it had been amidst the peak of the crisis. PDH disruptions and turn downs had been supportive of PGP pricing coming out of Asia. With the resumption of flows out of the Strait of Hormuz China is expected to ramp up its PGP production. However, the recent MOU collapse could throw this plan off course and tighten supplies once again if the Strait closes. 

Price Outlook

PP prices likely peaked in April and we are expecting prices to remain low in the very near-term. However, there does remain upside price risk. PGP pricing and propane prices have both seen a recent uptick after the massive rally in crude oil. PP prices have been very responsive to PGP pricing and the upside price risk in PGP will spillover to PP if it continues. August and September could see some upside in pricing with plants undergoing maintenance and current pricing levels are relatively attractive with the recent risks in the market poking through. 

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