NPRA '10: US olefins spot prices red hot ahead of meeting

28 March 2010 15:08  [Source: ICIS news]

US olefins spot prices red hotSAN ANTONIO, Texas (ICIS news)--US olefins prices were on a sharp uptrend as the International Petrochemical Conference got underway this week in San Antonio, lifted mainly by tight supply resulting from a series of cracker outages after the turn of the year.

Last year at this time, the market was reeling from the worst economic crisis since the Great Depression, but this year olefins are moving at full throttle, delivering the kind of return that seemed unimaginable after demand collapsed at the end of 2008.

Trading at 67.00 cents/lb ($1,477/tonne, €1,108/tonne) in late March, spot ethylene for prompt delivery had nearly tripled from 24.00 cents/lb a year before, an increase that would appear astounding on its own, if it were not for even larger jumps for propylene and butadiene (BD) in the same period.

Spot BD rose to 100.00 cents/lb from 20.00 cents/lb in the last 12 months, while polymer-grade propylene (PGP) prices jumped to 79.00 cents/lb from 24.00 cents/lb a year earlier, according to global chemical market intelligence service ICIS pricing.

Market participants have cited steady demand as one factor behind the surge, but a recurring theme in the industry is a harsh freeze that greeted Texas after the New Year, causing a spree of cracker shutdowns in its wake.

The freezing weather that gripped most of the US southeast in early January was said to have briefly disrupted operations in at least 12 crackers in Texas and Louisiana.

While most units resumed operations by mid-month, lost production in that period - combined with planned and unplanned shutdowns in the ensuing months - has provided support for higher spot prices while giving producers the upper hand in contract negotiations so far in 2010.

As delegates prepare to head to the National Petrochemical & Refiner Association (NPRA) meeting, the question on most everyone's minds is whether current olefins prices have peaked or are here to stay.

Ethylene and propylene are trading almost at the same level they did when crude oil hit a record high of $147/bbl in mid-July 2008.

The odds are that US buyers will likely have to stomach at least another month of price increases.

Market participants are predicting higher ethylene contract prices for March, as well as jumps of 6-8 cents/lb for propylene and 10 cents/lb for BD in April. Negotiations are expected to begin during the International Petrochemical Conference.

Moving beyond April, trends seem to point to sustained firmness in propylene and BD, resulting from the continued use of light feedstocks by US crackers, but a softening in ethylene due to competition from Asia and the Middle East in the resin and derivatives export market.

The NPRA International Petrochemical Conference runs Sunday through Tuesday.

($1 = €0.75)

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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