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Bi-Weekly Plastics Report - June 17, 2026

By: Alex Hodes, Energy Analyst - KC Energy

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Polyethylene (PE)

  • U.S. polyethylene prices were flat on the month in May and are now expected to move lower in June. The bullish case for prices is if peace does not return and if normal flows do not resume as quickly as the market anticipates. 
  • Feedstock prices have been moving lower - especially ethylene as supplies are ample. Expect feedstocks to not be an area of support moving forward. 

Supply

The supply side remains highly active, but the tightness seen in March and April has eased. May PE production in North America was around 5.77 billion pounds (up 2.2% from April), with operating rates near 98%, as producers responded to strong export demand and elevated margins. Days of inventory increased from 42.5 days in April to 54.4 days at the end of May due to production outpacing demand. Producers still have strong cost advantages, but the market no longer appears supply-short in the near term.

Demand

Domestic PE demand remains relatively healthy, but it is no longer strong enough to offset slower export activity. March domestic PE sales reached a record level, but by May domestic demand had moderated to 2.87 billion pounds. Buyers appear more cautious after the April price spike, and many are waiting for additional price relief before restocking aggressively.

Asian demand remains a major concern. Mainland China and other Asian markets have shown weak downstream demand, cautious procurement, and increasing availability of competitively priced cargoes. This has reduced the urgency for global buyers to chase U.S. material at elevated levels. Demand destruction in Asia was one of the first areas to show up in the market.

 

image-20260211150922-2

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

image-20260211150941-3

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

Feedstocks

Ethylene costs have been more mixed. Ethylene supply in North America remains adequate, with the market described as long in the near term, but sustained derivative demand could draw down inventories if production remains strong. The bigger picture is that North America still has a structural feedstock advantage, but the benefit is now being offset by falling PE prices and weaker export netbacks. Ethylene prices have been in freefall since May - indicating feedstocks will not be a supportive factor in the near-term.


Price Outlook

PE contract prices were flat in May from the previous huge jump. Buyers have stepped back in anticipation of a deal or a return of more supplies in the market. Prices are currently under pressure and the potential easing of Middle East supplies will alleviate any disruptions. Prices will likely move lower if the peace deal is signed on Friday and supplies begin to flow. 

Polypropylene (PP)

  • Polypropylene prices moved lower in May by 7 cpp after a massive spike the previous month. Prices are not expected to completely fall off and should be supported around the 65cpp level. 
  • 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. 

Supply

North American PP supply has loosened from the tightest levels seen in April. March operating rates were around 81.1%, and effective operating rates were estimated near 100% in April because outages reduced available capacity while producers ran hard to capture elevated margins. By May, however, the balance shifted. PP inventories have built rapidly as production exceeded total sales, pushing days of inventory from 34.2 days to 38.8 days heading into June. Producers are now expected to throttle rates in the coming months to better match demand and prevent further inventory pressure.

Planned and unplanned outages supported the market earlier in Q2, but the latest data suggest that supply is no longer the dominant bullish factor. The issue is now whether producers can reduce rates quickly enough to prevent oversupply while demand and export markets soften.

Demand

Domestic PP demand appears steady but not strong enough to absorb higher production and weaker exports ahead. March data showed a strong demand rebound, with domestic sales up 12.3% from February and total sales up 14%. Several end-use segments improved, including cups and containers, nonwovens, distributors, and compounders. However, May saw an easing in demand by buyers as prices were elevated.

Exports remain important but are not as dominant for PP as they are for PE. North America benefited when Europe and Latin America looked for replacement supply after Middle East disruptions reduced availability. Still, Asian offers into Europe and South America have created price resistance, and the market expects North American export volumes to decline as Middle Eastern trade normalizes.

image-20260211151057-5

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

image-20260211151038-4

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

Feedstocks

Polymer-grade propylene remains the main driver of PP pricing. PGP spot prices rose sharply in April, peaking around 62.5 cpp, as the market dealt with Strait of Hormuz uncertainty, PDH disruptions, and strong derivative demand. Propylene availability was constrained by operational issues at PDH units and crackers, while FCC propylene continued to compete with alkylation economics. However, prices have retreated substantially from their high level and a resumption of PDH plants in China could shift the supply demand balance. 

Price Outlook

PP prices likely peaked in April and we are expecting prices to move slower in the near-term. Producers will likely ease their rates to prevent the market from being too far oversupplied, but the biggest upside risks will be a resumption of the war or price rallies in PGP. 

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