US olefins market weakening on higher ethane, lower oil – analyst

24 October 2011 16:31  [Source: ICIS news]

US olefins weakenHOUSTON (ICIS)--The US olefins market is getting weaker because of higher ethane costs, lower oil prices, weaker export markets and lower volumes, an analyst for a US-based investment firm said on Monday.

The comments came in a research note on petrochemicals producer LyondellBasell, which releases its third-quarter earnings results this week.

The firm, Dahlman Rose, expects the company’s results to be on target, but it was cautious going into the fourth quarter because of the weakening olefins market.

“The US olefin market is getting weaker due to a combination of higher ethane costs and lower oil prices that have raised US raw material costs while global costs have declined,” analyst Charles Neivert wrote in the note. “This ultimately compresses the North American ethane advantage that the company has enjoyed over the past year.”

Another factor is the weaker export markets as international prices have declined.

“Product is now selling at a discount versus a premium to the domestic market just a few months ago,” the firm added.

Dahlman Rose also said buyers have been delaying purchases in anticipation of lower prices in the future, resulting in lower volumes exiting the quarter.

“International olefin results have likely improved in the third quarter as naphtha prices have come down, helping margins,” the firm said. “However, volumes may begin to ease on macro-economic challenges. We expect 4Q commentary to be cautious as destocking occurs in anticipation of lower prices.”

For more on ethylene visit ICIS chemical intelligence

By: Bobbie Clark
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