US olefins makers eye Jan hikes; buyers see flat

08 January 2009 22:03  [Source: ICIS news]

HOUSTON (ICIS news)--US olefins buyers on Thursday downplayed proposed increases put forth by US producers for January, saying contracts were likely to settle near flat from December.

US ethylene producers nominated increases of 7.0 and 7.5 cents/lb ($154 and $165/tonne or €114 and €122/tonne), while on the propylene side the initiatives ranged from 5 to 10 cents/lb, market participants said.

US chemical-grade propylene (CGP) in December settled at 18.50 cents/lb, while polymer-grade propylene (PGP) settled at 20.00 cents/lb, according to global chemical market intelligence service ICIS pricing. Both grades were down by 10 cents/lb from November.

Propylene buyers dismissed the idea of an increase for January, with one consumer calling the initiatives “nonsense”. A second buyer said it countered the nominations by offering to settle flat, but the source said it had yet to hear back from its suppliers.

On the ethylene side, a jump in spot prices this week seemed poised to lend support to a possible contract increase in January, “as long as the increase proves sustainable in the second half of the month”, one buyer said.

“We could see a 1-cent/lb increase in January if that happens,” the source said.

Ethylene spot prices surged by 20% in the first week of 2009, trading as high as 24.50 cents/lb on Wednesday, up from 20.50 cents/lb on 30 December.

Market sources attributed the increase to higher crude oil and feedstock prices in the past week.

However, one source said gains in the upstream energy complex could merely be a short-term phenomenon.

Some feedstock prices have climbed, but key ethylene feedstock ethane has already given back some gains, the source said.

Buyers acknowledged US ethylene demand has improved slightly in January, but one market participant said producers were overshooting by seeking increases of such magnitude.

“We've got 40%-plus of the North America crackers down," the source said. "How can one claim there is any strength in the ethylene market?”

US ethylene contracts settled at 28.50 cents/lb in December, down by 9.50 cents/lb from November.

Ethylene prices have dropped by about 60% since the summer when the market peaked at 74.50 cents/lb on the back of surging energy values.

The drop for propylene is even sharper. The monomer has plummeted by about 75% since July when PGP contracts hit 85.00 cents/lb and CGP settled at 83.50 cents/lb.

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

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

For more on olefins visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: William Lemos
+1 713 525 2653

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