Polyolefins Market Overview

The 2025 Polyolefins Market Overview that I presented at the Flexible Packaging Association’s (FPA) 2025 FlexForward^® Conference in New Orleans offered a clear picture of an industry that has reached maturity in North America.

The themes that emerged were familiar, yet more pronounced than in previous years. Domestic demand is stagnant, exports are carrying the load, trade tensions are reshaping flows, and the gap between domestic and global pricing continues to frustrate buyers. Despite all this, producers retain a strong cost advantage on the polyethylene side, which begs the question of why domestic prices remain higher than many buyers believe they should be.

This is a year defined by contradictions. Supply is ample, demand is soft, exports are essential, and margins for integrated polyethylene producers remain healthy. For polypropylene, however, the landscape is changing in ways not seen in decades. Together, these shifts create a market where converters need clarity, not guesses, and where solid knowledge becomes the only path to better negotiation outcomes.

The demand story: a mature market holds steady

One of the clearest signals this year is that North America has settled fully into a mature stage for both polyethylene and polypropylene. There is only so much resin the region can absorb, and the data makes that obvious. Low-density polyethylene (LDPE) continues to show modest growth, but linear low-density polyethylene (LLDPE) demand is essentially flat and high-density polyethylene (HDPE) demand is weak, declining sharply this year. End uses tell a similar story. Film and sheet applications are down, blow molding is down, and injection molding is down even more. These are foundational segments for flexible packaging, and their contraction confirms the broader slowdown.

Polypropylene (PP) demand has hardly moved in almost a decade. The main PP applications are also experiencing declines, especially in film and in large volume molding applications. This is not a temporary blip. It is the ongoing reality of a region that no longer grows organically and depends heavily on exports to sustain operating rates, particularly for polyethylene.

Exports drive the polyethylene industry

With domestic demand unable to carry the industry, exports have become the primary growth engine. Over the past several years, the buildout of polyethylene capacity in the U.S. and Canada has made the region one of the largest and most competitive global suppliers. Operating rates remain high only because exports absorb such a large share of production. LDPE, HDPE, and LLDPE all rely heavily on overseas sales, with more than half of the production of some products moving into international markets.

Inventories across polyethylene and polypropylene have been higher this year than last, which reflects the softness of domestic demand and reinforces the importance of exports. Meanwhile, polyethylene imports into North America keep growing. Although still a small percentage of domestic consumption, the steady increase is meaningful in a mature market and signals that buyers are turning to lower cost alternatives when domestic pricing drifts too far from global norms.

Trade frictions shift the global balance

Exports from the U.S. started the year strong, reaching a record in March. But that momentum faded as 2025 progressed. A major factor is the sharp reduction in polyethylene shipments to China, the single largest importer of the material in the world. While China’s total polyethylene imports increased this year, its imports from the U.S. dropped significantly. This is a direct consequence of the ongoing trade war and the 10% tariff that China applies to almost all U.S. polyethylene grades.

This tariff has reshaped trade flows. U.S. producers have redirected material to Africa, Southeast Asia, Europe, and Central America, where demand has grown and where U.S producers can still compete effectively. These alternative markets are growing fast, but not fast enough to fully replace the lost volumes into China. As a result, the U.S. export machine is running below its true potential, which raises competitive pressure and influences pricing strategies across the globe.

Polypropylene prices drop below polyethylene for the first time in decades

One of the most remarkable developments in 2025 is the reversal of the long-standing price relationship between polypropylene and high density polyethylene. For decades, polypropylene traded at a considerable premium to HDPE. That relationship collapsed this year. Propylene prices have fallen steadily, driven by weak demand and changes in supply fundamentals. Polypropylene prices fell even faster than monomer prices, creating a significant margin squeeze for integrated and nonintegrated producers.

This margin pressure is challenging for producers, but it brings one positive outcome for converters: for the first time in many years, polypropylene prices in the U.S. are aligned with global markets. This represents a long overdue correction and gives buyers more room to negotiate based on global benchmarks. In many ways, polypropylene has moved back to a price level that reflects true supply and demand fundamentals rather than historical distortions.

Polyethylene prices remain elevated despite soft demand

While polypropylene prices have corrected sharply, polyethylene tells a very different story. Domestic polyethylene prices continue to sit noticeably higher than global benchmarks, even after adjusting for logistics. When comparing domestic transaction values with international reference prices, the premium ranges from several cents per pound to close to ten cents depending on grade.

Export prices confirm this disconnect. U.S. producers are exporting polyethylene to global markets at significantly lower prices than they charge in the domestic market. In other words, buyers in Vietnam and other regions have access to North American resin at lower prices than buyers in the U.S. and Canada.

Some buyers have been told that high ethylene prices explain the elevated polyethylene prices. There is some truth in this when looking at nonintegrated cash costs, which reflect the cost of buying ethylene in the merchant market. But this is not how North American polyethylene is produced. Every polyethylene producer in the region is integrated back to ethane, and the true integrated cost of producing polyethylene remains far below domestic transaction prices. Even with slightly higher ethane prices this year, North American’s ethane-integrated polyethylene remains one of the most cost competitive plastics in the world. Domestic margins are lower than in recent years but still healthy. This explains how producers can export at lower prices and still remain profitable.

What buyers can do

Given the disconnect between domestic and global polyethylene prices, the natural question is what resin buyers can do about it. The answer begins with better information. Buyers need clarity on the actual prices being transacted in the domestic market, not estimates or indexes. They also need to understand how those prices compare with global benchmarks and with the prices at which producers export the same resin. Finally, knowing the true integrated production cost gives buyers a grounded sense of what kind of margins their suppliers are working with. Armed with this information, buyers can negotiate more effectively and focus on achieving fair value rather than accepting pricing that is out of alignment with global norms.

What to expect in 2026

The outlook for 2026 suggests another year of transition. New polyethylene capacity will come online, although some projects have been delayed. A major new HDPE project will start in Texas, and small additions will continue in polypropylene. Global rationalization will continue as high-cost producers, especially those reliant on naphtha, struggle with poor margins.

North American demand is expected to remain flat to slightly lower. Global demand will edge up but will not be strong enough to eliminate oversupply. Oil prices are expected to trend lower, while ethane prices may rise due to liquefied natural gas (LNG) export growth. Despite this, the ethane advantage in the U.S. will remain intact, keeping integrated producers in a strong cost position.

Trade flows will keep shifting as the U.S and China remain locked in a strategic economic contest. Export markets will be competitive, and domestic prices may move slightly lower, but buyers will need to work for those reductions through better data and better negotiation strategies.

The big message for the industry is that information matters. In a world where supply is ample, demand is soft, and trade realigns constantly, the winners will be those who understand the true economics of the market and use that knowledge to make smarter decisions.

Esteban Sagel is principal at Chemical and Polymer Market Consultants (ChemPMC).