Although polyethylene assumed its usual role as the star of the show during a recent LyondellBasell investor call, polypropylene received considerable attention, with executives calling it a “sleeping giant.”
While about 20% of global PE supply is impacted by the war in Iran, that figure is around 70% for global PP, said Kim Foley, EVP of olefins and polymers (O&P), during the May 1 call.
And even though PP pricing gains have lagged those for PE, executives see greater price increase potential for PP than for PE in coming months, and expect North America to shift from net importer of PP to net exporter. Historically virgin PP has been sold domestically, while PE was largely intended for export, but demand for PP exports is rising as Asian producers lose access to feedstock propane.
Foley said current virgin PP pricing was at around 60 cents/lb ($1,323/ton), lower than in 2021.
Post-consumer PP bales have surged in value in early 2026, from a national average of 9.50 cents/lb in February to 19.31 cents/lb in early May, according to RecyclingMarkets.net data.
Market sources attribute the run-up to more demand for virgin PP and subsequent higher pricing that encourages converters to consider recycled resin as a less expensive or more available option.
Industry-wide Q1 North American PE sales rose by 6.5% on the year, creating the strongest month for domestic PE since 2020, Foley said. At the same time, North American PE inventories dropped by 7.6%.
Demand destruction still unlikely
For the second quarter, the company expects both margins and sales volumes to increase as global supply constraints continue. April PE orders are 20% above pre-war averages for the company, while PP export orders are 15% higher, Foley said.
US April PE contracts settled higher by 30 cents/lb shortly before the investor call, and LyondellBasell has nominated an additional 20 cents/lb increase for May volumes – potentially a cumulative increase of 50 cents/lb or $1,102/metric ton.
January and March PE contract price increases and improved integrated margins helped LyondellBasell’s Americas O&P business double its Q1 EBITDA, at $327 million.
Foley acknowledged that “a structurally short market is usually resolved through demand destruction” or higher production, though she said the company sees no evidence of the former.
Demand destruction occurs when prices become so high that consumers change behaviors for an extended period of time, or permanently, and never compensate for the missed purchases. One example is that when gasoline prices stay high for a long time, consumers switch to EVs or more fuel-efficient cars, and do not resume buying as much gasoline even when prices ease.
“History has shown packaging demand remains robust in such scenarios,” Foley said. “Demand for durable goods has already been consistently at a low level since 2022, and prices are still well below peak levels in 2021.”
Vanacker added, “Let me remind everybody that the vast majority of polyethylene is going into consumables” and not durable goods. Foley added that after three to four years of “tempered” buying, pent-up demand for durables has grown.
She also noted that in 2021, the market accepted pricing 10-15 cents/lb higher than current levels, and “I think it can again, as we go forward. And without any correction to the supply-demand imbalance, I’m not sure why pricing would go down.”
And while industry consultants expect PE prices to erode in the second half of 2026, Vanacker and Foley explained their own positions.
“Four weeks ago, nobody expected or predicted that we would get a 30 cent per pound price increase for polyethylene,” Vanacker said, adding that he continues to be skeptical about those forecasts.
Foley added, “I politely disagree with the consultants.”
From supply glut to shortage
With global polyolefins production constrained due to logistical or plant issues, LyondellBasell is ramping up run rates for its North American assets.
North America is home to vast new PE production capacity, including Dow’s new Freeport plant in Texas, which started up last year, and a 2 million ton/year plant from the CPChem/Qatar Energy JV Golden Triangle expected to start up later this year or in early 2027 in Orange, Texas.
Originally planned 10-15 years ago, the plants are meant to focus on exporting PE, but amid lackluster global demand and oversupply, more resin than was expected has remained domestic. The resulting low pricing has dramatically affected US recycled PE markets, as customers opt for cheaper virgin resin and recyclers are unable to compete.
The more than 20% of global capacity for ethylene, PE and PP currently affected by the war “dwarfs the expected capacity additions this year and takes each of these markets from oversupplied to tight,” Foley said.
For the second quarter, LyondellBasell expects to run its assets at 90% of nameplate capacity, versus 85% in the first quarter, Foley said.
The company’s PP assets in the US and Europe have run at 70%-75% over the past two years, Foley said, leaving room for 15%-20% higher operating rates. “So the longer this goes on, the better” for PP, she added.
The vast majority of LyondellBasell’s polyolefins production is in North America and Europe, at 90% for PE and 70% for PP.
Amid the war in Iran, Asian polyolefins production has suffered due to lower availability of feedstock. China sources as much as half of its crude oil and a “substantial share” of its naphtha from the Middle East, where Foley said governments have instructed refiners to direct crude oil toward transportation fuels rather than chemicals.
