23 March 2013 14:00 [Source: ICIS news]
HOUSTON (ICIS)--Continued strength in US spot ethylene prices have moved them above spot prices for polymer-grade propylene (PGP) heading into the American Fuel & Petrochemical Manufacturers' (AFPM) International Petrochemical Conference (IPC).
US spot ethylene prices were higher than PGP prices for the first time since late October, with market players surprised by the result.
“I’m expecting that ethylene should start to come down soon,” a producer said. “It feels as though it’s a little over-priced.”
US ethylene prices were in the mid-60 cents/lb level for the week ended 22 March, and could continue to draw strength from downstream demand in the polyvinyl chloride (PVC) sector.
Sources said the PVC market is heating up on the impending US construction season, while the US polyethylene (PE) market is holding steady.
Domestic demand for PE is expected to carry the market, as overseas buyers are not showing strong interest for US material.
While ethylene prices are moving up or holding steady, US PGP spot prices have fallen in the past few weeks.
Sources said one of the biggest reasons for the decrease is the high price of the US contract, which is up 15 cents/lb since December 2012.
Downstream buyers have little to no interest in the high-priced material and are holding on to inventories in an effort to move the price lower.
The surge in contract pricing was largely driven by short-term supply concerns but was overdone, according to several market players.
With market sources expecting another fall in April contracts of about 6-7 cents/lb ($132-154/tonne), buyers are retreating to the sidelines.
This has pushed US spot PGP prices into the low-60 to mid-60 cents/lb level for most of March, slightly below ethylene values.
If prices fall in April and May, a rebound could come in June and July on the back of stronger demand for propylene as a gasoline alkylate during the US summer driving season.
Major US olefins producers include Chevron Phillips Chemical, Dow Chemical, ExxonMobil, INEOS, LyondellBasell and Shell Chemical.
The IPC takes place from Sunday through Tuesday in San Antonio, Texas.
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