US Oct ethylene jumps 10% on spot surge, higher ethane

03 November 2010 15:18  [Source: ICIS news]

A LyondellBasell cracker in TexasHOUSTON (ICIS)--US ethylene contracts for October settled up by 3.75 cents/lb ($83/tonne, €59/tonne) on the back of higher spot prices and increased production costs last month, market sources said on Wednesday.

The 10% jump puts the monthly contract at 42.75 cents/lb for October.

Market participants said they had expected the monomer to rise, citing a surge in spot prices in the last four weeks.

Ethylene ended October trading at around 40.00 cents/lb, an increase of nearly 15% from deals done at 33.875-36.000 cents/lb in the first week of the month.

The uptrend stemmed from lean supply, which was exacerbated by scheduled maintenance at three crackers and unplanned shutdowns in at least three other units during October.

US ethylene supply has been limited for several months and any production issues can quickly throw the market off-balance, a producer said.

Ethylene spot prices also rose because of a surge in the price of ethane, a key US feedstock for monomer production.

Mont Belvieu ethane prices rose by 20% in October, closing the month at 66.00 cents/gal amid ever-growing demand for the product from chemical producers.

The feedstock posted further gains this week, trading at more than 70.00 cents/gal on Tuesday and pointing to continued strength for ethylene in the coming weeks.

“It looks like November is still in that momentum,” a market participant said.

Ethylene spot prices have also risen sharply this week, lifted by upward pressure from ethane and talk of new cracker outages in Texas.

November ethylene traded on Tuesday as high as 45.00 cents/lb, for a daily gain of nearly 10% from 41.00 cents/lb on Monday.

The surge followed news that INEOS had experienced a major outage at its Chocolate Bayou complex in Texas.

The company has two steam crackers at the site with combined ethylene capacity of 1.8m tonnes/year.

Market participants said both crackers were taken down as a result of a lightning strike, following heavy thunderstorms in southeast Texas over the past two days.

The outage caused the company to declare force majeure (FM) on output from Chocolate Bayou, but details were not available.

INEOS does not comment on operations, according to a spokesperson.

Ethylene bid/offers for November were at 44.00-55.00 cents/lb early on Wednesday.

Other outages in the US included Dow Chemical’s Freeport LHC7 cracker in Texas, which was shut down on 13 October following a steam turbine outage.

Dow did not say when the 612,000 tonne/year unit would be restarted. The company has a second cracker in Freeport, LHC8, with 1m tonnes/year of capacity.

US ethylene producers include Chevron Phillips Chemical, ExxonMobil, INEOS, LyondellBasell and Shell Chemicals.

Buyers include Dow Chemical, Georgia Gulf, Occidental Chemical (OxyChem) and Total.

($1 = €0.71)

For more on ethylene, 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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