29 October 2008 14:00 [Source: ICIS news]
HOUSTON (ICIS news)--US ethylene (C2) contracts for October have begun to settle 12 cents/lb ($265/tonne, €209/tonne) lower than last month, pressured by weaker demand and lower feedstock costs, market sources said on Wednesday.
The initial settlements put October US ethylene at 51 cents/lb, according to global chemical market intelligence service ICIS pricing.
One buyer said most of the market had agreed to a 12 cents/lb drop for October but another buyer vowed to hold out for a bigger decrease.
“It is an insufficient decrease... given what has happened to cost and price for ethylene in the month of October,” the buyer said, referring to feedstocks and spot ethylene prices.
Spot ethylene for October traded on Monday at 26.50 cents/lb, down from deals done in a range of 51.75-57.00 cents/lb on 2 October.
One market participant said US ethylene spot prices had not dropped even further because of supply disruption in September caused by hurricanes Gustav and Ike.
On the feedstock side, US ethylene cash costs were at roughly 25 cents/lb this week, one producer said.
That figure compared with 65 cents/lb in July based on feedstock ethane prices at the time.
Mont Belvieu ethane prices in Texas were at about 47 cents/gal on Friday, down from $1.44/gal in mid-July.
Another source not involved in the settlements but active in the ethylene market said 12 cents/lb did not seem enough of a drop.
A reduction of 22 cents/lb was about right based on current market conditions, the source said.
US ethylene contracts usually settle at the end of the month but negotiations can linger if not all parties agree to a single settlement.
So far in 2008, the monomer has settled three times in two-month settlements due to hold-outs.
Chevron Phillips, Equistar, ExxonMobil, INEOS and Shell Chemicals are among the major producers of ethylene in the US.
Dow Chemical, Georgia Gulf, Occidental Chemical and Total are among the buyers.
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