02 September 2011 19:13 [Source: ICIS news]
HOUSTON (ICIS)--US ethylene contracts for August settled at 55.50 cents/lb ($1,224/tonne, €857/tonne), down by 1.25 cents/lb from July, market sources said on Friday.
The 2.2% reduction followed a drop in production costs in July, which more than offset an increase in average ethylene spot prices last month.
July ethylene settled at 56.75 cents/lb, as assessed by ICIS.
The drop for August came as a surprise to some market participants, who had expected only a minor decline for the month.
However, one source said a larger contract drop was needed to keep US ethylene derivatives competitive in the export market.
The US exports around 20% of its polyethylene (PE) production, another source said.
Polyvinyl chloride (PVC) exports were as high as 40% earlier in the year, but shipments have since come off those levels, a market participant said.
US ethylene contracts usually settle at the beginning of the month for the previous calendar month.
US ethylene spot prices moved up this week, with September material trading at 63.000-63.875 cents/lb, up from 61.750-63.125 cents/lb a week earlier.
The increase stemmed from continued inventory building in the US as a result of ongoing and upcoming cracker turnarounds.
Major 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 = €0.70)
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