US ethylene for December settles at 44.50 cents/lb, down 1.7%

04 January 2013 17:33  [Source: ICIS news]

US ethylene for December settles at 44.50 cents/lb, down 1.7%HOUSTON (ICIS)--US ethylene contracts dropped by 1.7% for December, market sources said on Friday, as lower production costs last month outweighed an increase in spot prices.

US ethylene contracts normally settle at the beginning of the month for the previous calendar month.

The 0.75 cent/lb ($17/tonne, €13/tonne) reduction, the third consecutive monthly decrease, puts December ethylene at 44.50 cents/lb.

The figure compares with a settlement of 54.75 cents/lb one year earlier.

The drop in December followed a reduction in production costs as a result of lower ethane prices, which averaged 23.9 cents/gal during the month, down by 18% from 29.3 cents/gal in November.

Ethane prices softened on continued supply pressure and weaker demand as at least five US crackers experienced unscheduled shutdowns in the past few weeks.

The outages dampened demand for ethane, while causing a significant run-up in the price of spot ethylene at a time when prices were expected to fall.

Ethylene for prompt delivery ended December trading at around 60 cents/lb, up from 50.750-51.375 cents/lb in the last week of November.

The monomer traded several times this week above 59.50 cents/lb for January delivery and at 60 cents/lb for delivery in February.

Spot ethylene may hold onto its gains, at least for the short term, as the US has two olefins plants with scheduled maintenance in January.

Among the expected outages are a 45-day stoppage at Huntsman’s 193,000 tonne/year Port Neches unit in Texas and a 50-day turnaround at Westlake’s 699,000 tonne/year Petro 2 cracker in Louisiana, both of which are scheduled to start in the next few days.

The shutdown at Westlake, which was originally planned for the fourth quarter of 2012, includes an expansion that will raise capacity at the unit by 230m-240m lb/year (104,000-109,000 tonnes/year).

The expansion is part of a new era of growth in the US industry that could result in a 35% surge in ethylene production in the next few years.

Two other US producers are expected to follow in Westlake's footsteps later in 2013 with capacity expansions of their own.

The three expansions, combined with the restart of a 380,000 tonne/year Dow Chemical cracker in Louisiana at the end of December, could bring nearly 2bn lb/year of new capacity to the US industry this year.

($1 = €0.77)

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By: William Lemos
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