Feedstock prices tumble

09 July 2001 00:00  [Source: ICB]

Falling US natural gas prices may give some respite to cracker operators and help revive the olefins-polyolefins chain. Natural gas prices are down to $3.20/m Btu, close to traditional levels and a long way from the winter spike of $9.50/m Btu.

Market observers believe the lower feedstock prices will take some pressure off cracker margins, which have been squeezed for most of the first half of the year.

A US consultant noted: 'We said a summer gas price spike was highly unlikely, given the number of new rigs in the ground and the build-up of inventories. The likelihood of another winter price hike has significantly diminished, which should increase the confidence of the US olefins markets.'

###10254###

However, ethylene prices continued to come under downward pressure. June contract prices fell 1 cent/lb to 28 cent/lb, after a 1.5 cent/lb fall in May. Players note that transaction prices are even lower, down to 23.50-24 cent/lb, as buyers and sellers utilise a number of pricing formulas, which incorporate spot numbers or are related to cracker cash costs.

A number of US crackers remain down or running at reduced levels. Pace's senior consultant Tom Wisner said: 'Cracker operating rates show low effective and nameplate figures. In June, nameplate was close to 75% with effective rates around 84%. Ethylene producers now have inventories at the desired levels. Downstream inventories have also been rationalised. If demand picks up in Q3, the US domestic market should improve significantly.'

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly