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Bi-Weekly Plastics Report - August 7, 2026

Alex Hodes
Alex Hodes

Energy Analyst - KC Energy

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Polyethylene (PE)

  • U.S. polyethylene prices fell by 10cpp on the month and appear to be headed for more downward pricing. Supply continues to outpace demand, and exports have started to reduce substantially.
  • Feedstocks have not been supportive of PE pricing but continued disruptions upstream could have an effect on crude oil and natural gas pricing ahead. 

Supply

The supply side appears ample but producers have started to moderate their operating rates. U.S. and Canadian PE production fell 6.8% from May to June but still are running at elevated levels of 92.7%. Year-to-date production numbers are up 8% since 2025. Days of inventory fell from 54 days in May to 49.9 in June, which is above the 12-month and 24-month averages - indicating that inventories are well-supplied. 

Demand

Domestic demand remains stable but exports have softened substantially. The balancing act has been by producers who have started to throttle rates lower. Domestic demand was up 4.1% from May to June but buyers remain cautious after several months of falling prices and are largely restocking only as needed. 

Export demand is a large concern after the huge surge in exports helped lift markets in April and May. Year-to-date exports are still up from 2025 but May export levels are reported to be near the lowest level since October of 2024. Buyers abroad have stepped back and are waiting for lower prices. However, the recent escalation once again in the Middle East could have buyers start to jump back in. 

 

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 moved slightly higher in July but the feedstock prices have not offset the weaker resin fundamentals. Further upstream, natural gas prices continue to move lower - hitting their lowest point in 2026. North America still has a structural cost advantage, but that advantage is being diluted by weak export netbacks, Chinese export competition, and the possibility that Middle East supply gradually returns. The EU tariff removal on U.S. PE is a constructive development and should support flows into Europe, but it is unlikely to fully offset the broader global oversupply pressure.


Price Outlook

PE contract pricing was down 10cpp on the month and the momentum continues to be moving lower. However, current markets are pricing their lowpoint in October before stabilizing. Markets still have a large amount of upside potential - with the Strait of Hormuz and expanded disruptions in the Red Sea affecting oil and gas markets. Supportive crude oil prices should eventually spill over into feedstock pricing, and any ethylene production disruptions could cause price spikes but the current momentum is down. 

Polypropylene (PP)

  • Polypropylene prices rebounded - moving 3cpp higher on the month. The ongoing risk to Strait of Hormuz flows has helped keep exports supported. 
  • Polymer-grade-propylene (PGP) supply tightened over the month after several PDH units went offline. PGP pricing will be very important with regards to PP pricing ahead - and remains to be the single source of potential upside price risk. 

Supply

North American PP supply is healthy but producers are throttling rates currently - going from 82.8% in May to 80.3% in June. Production in 2026 is still outpacing 2025 levels but now we are seeing days of inventory tightening somewhat. Outages in August and September could add to the drop in inventory and production is expected to stay capped. 

Demand

Domestic demand is steady but it has not been enough to absorb production if exports start to retreat. Domestic demand is up 1.4% from May to June and almost flat with 2025 year-to-date levels. End-use demand is mixed but is stronger than demand in PE. Exports remain elevated but are expected to decline ahead. Exports are up 58.6% year-over-year in May from 2025 as buyers look to the U.S. to fulfill their appetite. Continued disruptions in the Strait of Hormuz may provide more support for U.S. exports and will provide the outlet for markets to be supported. 

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

PGP spot prices were volatile. U.S. PGP spot prices ranged from the high 30s to the high 40s cpp during July due to outages, but prices fell into the low-to-mid 30s by the end of the month. Capacity availability fell to 83% in July, down 3 percentage points from June. Enterprise PDH 1 had a brief disruption, Enterprise PDH 2 was offline in mid-July, and Dow’s PDH was down for planned maintenance. There is expected to be a return of some PDH plants in August which could put pressure downward on PGP and the big question will be whether China reduces its PDH rates if the Strait of Hormuz remains closed. 

Price Outlook

PP prices are expected to move lower in August. July GP homopolymer contract prices moved to 73.5-77.5 cpp, and injection-molding copolymer moved to 76.5-81.5 cpp. Spot domestic PP fell 3.25 cpp in July to 52.5 cpp FOB Houston, while export prices averaged 56 cpp FAS USGC and DAP Laredo prices fell to 55.75 cpp. The disconnect between higher contracts and weaker spot/export values is the key reason margins are expected to compress. Feedstock modeled PP prices are about 5-6cpp lower than what CMA indexes are pointing to - suggesting margin compression is expected. 

The biggest upside risk is renewed Middle East disruption. If the Strait of Hormuz or Bab el-Mandeb remain restricted and Middle Eastern PP exports cannot normalize, the expected August/September margin compression may need to be revised. The potential upside is where the risk lies - especially in the very near-term to Q4 of 2026. 

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