US ethylene spot prices rise 5% on growing flood fears

13 May 2011 19:23  [Source: ICIS news]

Flooding along the Mississippi riverHOUSTON (ICIS)--US ethylene spot prices rose by 5% in the last three days, market sources said on Friday, citing growing fears that flooding will affect operations at crackers near the Mississippi river.

Ethylene for May traded at 70.50 cents/lb ($1,554/tonne, €1,088/tonne) on Friday, up from deals done at 67 cents/lb early in the week.

Market sources said the surge in spot prices stemmed from concerns that expected flooding next week could disrupt production at a number of crackers near the Mississippi river in Louisiana.

The crackers that could be affected include a 610,000 tonne/year Dow Chemical unit in St Charles; a 612,000 tonne/year Williams cracker in Geismar; and two Shell crackers in Norco, which have a combined capacity of 1.4m tonnes/year.

"The [Mississippi] river peaks next week at levels never seen by these crackers," a market source said, adding that flooding could force the crackers to cut rates, if not shut down altogether.

The four crackers account for around 10% of total US ethylene capacity.

Slow barge traffic on the Mississippi could also become a problematic issue for crackers in the region.

One concern is that the crackers may not be able to move out co-product volumes. The Mississippi is flowing at incredible speeds downstream, and barges cannot get up the river for loading, a consultant said.

If co-product tanks begin to fill up, the crackers will have no option but to shut down, the source added.

A reduction in barge traffic could also impact feedstock deliveries to the crackers, another source said.

ExxonMobil also has a cracker near the Mississippi – a 1m tonne/year unit in Baton Rouge – but the cracker is far away enough from the river so that the flooding will not pose a major risk.

An ExxonMobil spokesperson said the company is monitoring the situation and has a flood preparedness plan in place for the complex.

Dow is preparing to release a statement on the situation in Louisiana later on Friday, a spokesperson said. The company has two other crackers near the Mississippi in Plaquemine, Louisiana, but one of the units is already down for maintenance.

Williams did not immediately respond to a request for comment.

Shell said it was preparing for the possibility that rising waters from the river could affect operations at its Geismar and Norco facilities.

($1 = €0.70)

For more on ethylene visit ICIS chemical intelligence

By: William Lemos
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