US Jan ethylene drops 7% on lower spot, feedstock prices

02 February 2011 17:08  [Source: ICIS news]

HOUSTON (ICIS)--US ethylene contracts for January settled down by 3.25 cents/lb ($72/tonne, €52/tonne), market sources said on Wednesday, pressured by lower spot prices and softer production costs last month.

The decrease from December, which put the monomer at 45.25 cents/lb for January, was widely expected.

Market participants had predicted the monthly contract would drop by 2-4 cents/lb, citing lower spot prices and a drop in production costs throughout January.

US spot ethylene in January traded at 41.500-44.000 cents/lb, dropping from an average of 42.750-51.375 cents/lb in December, as assessed by ICIS. The decrease in January stemmed from a more balanced market, following tighter supply in the previous month.

Ethylene supply in November and December, particularly in the first half of that month, was constrained because of a series of US cracker outages in the fourth quarter.

The drop in ethylene prices in January also reflected lower production costs, resulting from a decline in ethane prices.

Mont Belvieu ethane in January averaged around 61 cents/gal, down from 65 cents/gal in December, for end-of-week closings.

The drop reflected weaker demand - due partly to increased competition from heavier cracker feedstocks such as naphtha, sources said.

Ethane continued to trend lower this week, largely ignoring higher crude oil prices, dropping to 56.000-59.375 cents/gal late on Tuesday.

($1 = €0.72)

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By: William Lemos
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