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.'
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