US ethylene market remains divided regarding upcoming settlement

02 July 2013 19:56  [Source: ICIS news]

HOUSTON (ICIS)—There has been little movement toward a compromise for US ethylene contracts, which remain assessed at March levels, sources said on Tuesday.

“It has come to this,” a buyer said. “We have a whole quarter with some major companies having earning reports left hanging.”

March remains the latest month settled for US ethylene contracts, at 48 cents/lb ($1,058/tonne, €815/tonne).

Typically, US ethylene contracts settle at the start of a month for the previous month.

However, buyers and sellers are arguing for different methods of calculating the monthly prices, which stalled April and May settlements.

“It all takes time for everything to line up,” another buyer said. “But nobody knows anything now that they didn’t know then.”

Sources said producers are seeking a contract price more closely tied to the monthly average spot price, which was between 56-57 cents/lb in June.

The producers are arguing that this more closely resembles the true market for ethylene.

Buyers have dismissed this idea, saying that spot prices are often the result of producers buying among themselves to cover outages or shortages.

“Producers have a vested interest in buying several million pounds higher to make their 100 million pounds more valuable,” a buyer said.

Additionally, higher ethylene prices have limited the ability of downstream polyethylene (PE) and polyvinyl chloride (PVC) producers to compete in the global market.

Based on the average monthly decline in spot ethylene and cheaper feedstock ethane, some sources said a June contract price of 44-45 cents/lb makes the most sense.

The most recent triple-month settlement came in July, August and September of 2009, when three separate prices were reached.

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 = €0.77)

By: John Dietrich

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