US spot ethylene solidifies slide after supply-based surge

20 May 2013 22:46  [Source: ICIS news]

HOUSTON (ICIS)--US spot ethylene prices for front-month material solidified their slide from the previous week’s mid-week run-up on Monday.

US May ethylene traded at 58.25 cents/lb ($1,284/tonne, €1,002/tonne) on Monday, in-line with the closing deal of the previous week at 58.00 cents/lb.

The two most recent spot trades came after prices reached a high of 62.375 cents/lb on 15 May.

The run-up on 15 May also saw two trades at 62 cents/lb on news of several unplanned cracker outages, a jump of 2-3 cents/lb from the previous spot deals.

However, the run-up was immediately slowed with the trade at 58 cents/lb on 16 May.

Market sources said the run-up appeared overdone and was based on speculation that the cracker shutdowns would severely tighten supply.

As a result, speculators drove up the prices, hoping to sell off material to end users who were short on material, sources said.

However, market players said demand for ethylene from the polyethylene (PE) and polyvinyl chloride (PVC) segments is softer than expected.

This meant there were no end-use buyers willing to pay premiums for material, even if supply was tight.

“I don’t think there are long-term fundamentals to support the higher levels,” a trader said. “But it’s hard to know where we’re going.”

There was some concern that the trade of 58 cents/lb would be an aberration, as no deals were done on 17 May, but bid/offer levels hovered around 58-60 cents/lb, well below the mid-week trio of deals.

With Monday’s deal at 58.25 cents/lb, market players feel the most recent deals are a better reflection of where prices are.

“The 58 cents/lb level is where we are pegging the May market,” a producer said. “June is down to 60 cents/lb.”

Major US ethylene producers include Chevron Phillips Chemical, ExxonMobil, INEOS, LyondellBasell and Shell Chemical.

Major buyers include Axiall, Dow Chemical, Occidental Chemical and Total.

($1 = €0.78)

By: John Dietrich

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