US and Canadian PE, PP market players brace for impact of new tariffs

North American polyethylene and polypropylene market players are preparing for shifts in trade flows in response to US President Trump's proposed 25% tariffs on non-energy Canadian imports.

While the tariffs were initially meant to take effect Feb. 4, Canadian Prime Minister Justin Trudeau wrote on social media Feb. 3 they would be paused "for at least 30 days while we work together."

Canada-based suppliers of both resins have been moving material to US warehouses in February, according to market participants, aiming to sell from stocks in March and delay having to pay the increased duties.

"When they produce product today, they're moving it to the US ... if, for no other reason, to help them buy time," a PE and PP buyer said Feb. 13.

The specific scope of tariffs on chemical products coming into the US from Canada is not yet clear. However, multiple polymer makers have told customers that they will take responsibility for paying the proposed tariff costs, sources said.

PE flexibility potentially compromised

US tariffs on Canadian imports, if applied specifically to the resin, would impact flows for about 17% of the PE produced between the two countries, according to S&P Global Commodity Insights data. The US and Canada combined have a total 30.206 million mt/year of PE capacity, 4.77 million mt/year of which is in Canada; Celanese, Dow Chemical, ExxonMobil and Nova Chemicals have Canadian production sites.

Customers who buy Nova Chemicals product in particular are concerned, a domestic distributor source said, as the company has no US-based production. In response, some of these customers are looking to other US-based producers to meet their PE needs, the source said.

Some PE makers, including ExxonMobil, have production in both countries, and need flexibility to swing between US and Canadian plants to meet customer demand, the same source said. For example, injection-grade high density polyethylene products can be sourced from Sarnia, Ontario, or from one of ExxonMobil's two HDPE sites along the US Gulf Coast.

Nova and ExxonMobil have communicated to customers that they will pay the tariff costs, the distributor source said.

"That can only go on for so long before these companies will have to probably raise some prices," the source added.

An ExxonMobil representative did not respond to a request for comment.

"The potential implementation of the tariffs announced by President Trump is still evolving, and we are closely monitoring the situation," Samantha Peck, Nova's external communications manager, said in a statement emailed to Commodity Insights Feb. 13. "The NOVA team is creating business planning scenarios to minimize any impact due to the potential tariffs and we will continue to advocate for a trade environment that supports the growth and stability of the plastics industry and works to ensure long-term economic security for North America."

Integrated Canadian PP impacted

Canada is also home to North America's only integrated PP producer. Inter Pipeline's Heartland Petrochemical Complex has 525,000 mt/year of PP production and a propane dehydrogenation unit with a capacity of 535,000 mt/year, Commodity Insights data shows.

Like Nova and ExxonMobil, Heartland has communicated to customers that it will pay the costs of the new tariffs, according to a second domestic distributor source. A company spokesperson did not respond to a request for comment.

Resin from the integrated Canadian complex is often more competitive in US markets, particularly during times when spot feedstock supply is compromised. US-based PP makers rely on the spot domestic polymer-grade propylene market for feedstock supply, which is frequently subject to volatility if one of the US's four propane dehydrogenation units has a production issue.

The US imported more than 300,000 mt of PP resin from Canada in 2024, according to data from S&P Global Market Intelligence's Global Trade Atlas.

"Tariffs are a huge concern for us, the US is a transition port for us when we import PP from Canada," an export distributor source said. "We're gonna have to rent warehouses in free trade zones and PP prices will probably go up."

A PE and PP trader based in Mexico said buyers are hesitant to bring material to Mexico from the US and are already looking for Chinese-origin alternatives.

Platts, part of Commodity Insights, assessed spot export HDPE blowmolding at $948/mt FAS Houston on Feb. 13, stable on the day. The Feb. 13 assessment is $88/mt, or 4 cents/lb, higher than prices at the start of the year.