US ethylene margins fall 3.3% on higher feedstock prices

23 July 2012 15:40  [Source: ICIS news]

HOUSTON (ICIS)--US ethylene spot margins fell by 3.3% in the third week of July, pressured by higher feedstock prices, the ICIS margin report showed on Monday.

Ethylene margins were assessed at 35.53 cents/lb ($783/tonne, €650/tonne), using ethane as a feedstock, down from 36.73 cents/lb in the week that ended on 13 July.

The decline came amid a continued increase in the price of ethane, which ended Friday at 41 cents/gal, rising by 24% from 33 cents/gal a week earlier.

Ethane accounts for around 60% of the feedstock volumes used to make ethylene in the US.

The increase in the feedstock price stems from strength in the upstream energy complex, as crude oil and natural gas futures posted new gains last week.

NYMEX light sweet crude for August delivery ended Friday at $91.44/bbl for a weekly gain of nearly 5%. Natural gas prices gained just over 7% for the week, with the front month closing Friday at $3.081/MMBtu.

The drop in ethylene margins last week was limited by an increase in the price of spot ethylene, which traded at 47.50-49.75 cents/lb for July delivery, up from 44.25-49.00 cents/lb week earlier.

Market participants have pointed to increased demand as a result of downstream re-stocking as the underlying factor lifting US ethylene prices.

News early on Monday that Flint Hills Resources (FHR) was shutting down its Port Arthur cracker in Texas to repair a steam leak could lend further support to ethylene prices this week.

($1 = €0.83)

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By: William Lemos
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