US ethylene nears June-July settle of +9 cents

01 August 2008 21:26  [Source: ICIS news]

HOUSTON (ICIS news)--The US ethylene market was nearing contract settlements of plus 5 cents/lb for June and plus 4 cents/lb for July, but final confirmation may not come until next week, participants said on Friday.

"It's not rock solid," one trader said. "A couple of big buyers are holding out."

June had already partly settled with a 5 cents/lb increase to 70.50 cents/lb ($1,554/tonne, €994/tonne), according to global chemical market intelligence service ICIS pricing. But negotiations with some buyers for June, and with most buyers for July, have dragged on as the decline in crude oil stiffened opposition to the hikes being sought by ethylene producers.

Producers had initially nominated increases of 5-8 cents/lb for June, and then 8-18 cents/lb for July, amid the runaway surge in crude oil values in June and early July.

But since New York Mercantile Exchange (NYMEX) http://www.nymex.com/ crude futures peaked at $147.27/bbl on 11 July, oil prices have fallen sharply and spot ethylene values have followed suit.

Although producers pointed out that ethane feedstock values remained relatively strong, buyers said the nosedive in the oil market has turned sentiment toward a softening of the ethylene market.

Ethane was trading at around $1.23/gal on Friday, up from $1.17/gal on 25 July but down from $1.51/gal on 11 July, when crude peaked.

US steam cracker operating rates have been fairly robust, with few production issues of note.

A process upset at Chevron Phillips' 800,000 tonne/year Port Arthur cracker in Texas that began on Tuesday had not been significant and did not change the view of ample supply, sources said.

Spot deals for July ethylene at 54.50 cents/lb and 53.50 cents/lb on Thursday were down from 56.00 cents/lb on Wednesday, and down from the previous deal at 60.00 cents/lb on 23 July.

Chevron Phillips, Equistar, ExxonMobil, INEOS and Shell Chemicals are among the major producers of ethylene in the US.

Dow Chemical, Georgia Gulf, Occidental Chemical (OxyChem) and Total are among the buyers.

($1 = €0.64)

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By: Stephen Burns
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