US ethylene margins drop to 4–week low on softer spot prices

12 September 2011 17:54  [Source: ICIS news]

A Westlake cracker in LouisianaHOUSTON (ICIS)--US ethylene margins fell in the first week of September, pressured by softer spot prices and slightly higher production costs, the ICIS margin report showed on Monday.

Ethylene margins were at 31.61 cents/lb ($697/tonne, €509/tonne) for the week ended 9 September, down from 34.34 cents/lb a week earlier, using ethane as a feedstock.

The drop took margins to their lowest level since early August, the report said, attributing the decline last week to a nearly 4% drop in ethylene spot prices.

Ethylene for September traded at 60.000–62.000 cents/lb, down from 63.000-63.875 cents/lb a week earlier, pressured by adequate supply, a slowdown in derivative demand and talk of a delay in a cracker turnaround.

Talk circulated in the market last week that Dow Chemical will push back maintenance at a cracker in Louisiana, delaying a turnaround that was originally scheduled for next month and putting pressure on ethylene.

Dow was expected to shut down the 610,000 tonne/year cracker in St Charles on 10 October for 30 days.

No details are available on the reasons for the delay.

Information on a new timeframe for the turnaround is also unclear, with sources saying it could be in January 2012 or in the first half of 2013.

However, Dow was heard to be selling some ethylene last week, which indicates the turnaround is more likely being moved to 2013 rather than 2012, a market source said.

A Dow spokesperson did not respond to requests for comment.

Market sources also said the drop in spot prices last week could be supply-driven, as no unplanned shutdowns were heard in the industry.

US ethylene output was significantly affected by outages earlier this year, which included as many as 30 unplanned shutdowns between January and August, according to an ICIS assessment.

A slowdown in US derivative exports, particularly polyethylene (PE), was also cited as eroding support for the monomer this week.

The US exports around 20% of its PE production, but a drop in Asian prices was limiting interest in US material, a trader said.

US ethylene bid/offers for September were heard on Monday at 59.000–61.000 cents/lb. October ethylene was offered slightly lower at 60.125 cents/lb, while November was bid at 57.000 cents/lb with no offers.

($1 = €0.73)

For more on ethylene visit ICIS chemical intelligence

By: William Lemos
+1 713 525 2653

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