US ethylene margins hit bottom with May contract - analyst

06 June 2012 18:07  [Source: ICIS news]

HOUSTON (ICIS)--US ethylene margins have likely bottomed with the May ethylene contract settling at 46.25 cents/lb ($1,020/tonne, €816/tonne), 16% lower than the April contract, a US-based investment analyst said on Wednesday.

As a result of the bottoming ethylene price, derivative pricing should stabilise over the next few months, according to a research note by Dahlman Rose managing director Charles Neivert.

"We are unlikely to see further material downside to chemical prices and margins unless we have weaker oil prices that lower naphtha-based production economics," Neivert said. "Additionally, we may see further downside if weaker demand conditions persist, but we believe the downside is likely to be much smaller than the 16% capitulation that we saw for the most recent contract."

He said some of the demand decline was a result of downstream destocking, which should run its course by mid-June. Lower prices should bring buyers back into the market, he added.

($1 = €0.80)

By: Bobbie Clark
+1 713 525 2653

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