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Ethylene Market Update – March 2010

Ethylene - the Main Ingredient in Poly Bags

The price fluctuation in the global poly market over the last several years has been anything but predictable. Dramatic volatility in polyethylene, polypropylene, and PVC has caused great uncertainty for both poly bag manufacturers and consumers alike.

These fluctuations hinge on the use of several raw materials key to poly bag production, most notably crude oil and natural gas, which not only fuels our cars and heats our homes, but are also the primary building blocks used to produce ethylene – the main ingredient in poly bags.

Crude Oil Prices

In January 2004, crude oil was selling at approximately $34/barrel. The price has since more than quadrupled however, reaching a new record high of $145/barrel in July 2008. Today's price of $82/barrel has leveled, but consumers are still paying more at the pump, and manufacturers are still paying a premium as compared to past years.

Asian market pressures, changes in supply and demand, a very weak U.S. dollar, political uncertainty, and global weather conditions have all contributed to volatile prices. More importantly, these factors have the combined effect to forever change the market.

Uncertain Future

China and other Asian countries continue to compete in their demand and usage of raw materials. In addition, new ethylene production plants are being constructed in Southeast Asia and the Middle East, which will continue to put stress on domestic producers.

World politics, production outages, severe weather, and sporadic global demands continue to cause volatility. We will continue to monitor this situation closely, and provide updates as changes occur.