US August ethylene contracts could move up on feedstocks

03 September 2013 20:16  [Source: ICIS news]

US August ethylene contracts could move up on feedstocksHOUSTON (ICIS)--US August ethylene contracts were likely to increase on higher production costs and steady spot prices, sources said on Tuesday.

A market source said it expects August contracts to settle higher by 1.5 cents/lb ($33/tonne, €25/tonne) if they reach a settlement.

“We could be waiting until September contracts for a settlement though,” the source said. “The 10 cent/lb gap between spot and contract is too big.”

US July ethylene contracts settled at a rollover of 45.5 cents/lb.

US spot ethylene prices in August averaged roughly 54.50 cents/lb, down from July’s average of 55.25 cents/lb.

The drop was more than offset by higher production costs for ethylene, however.

Although the ethane portion of the US cracker feedslate was only slightly higher in August at around 24.75-25.00 cents/gal, other feedstock costs surged.

Propane costs increased by 19 cents/gal during August. Butane costs increased by 10 cents/gal, and paraffinic naphtha increased by $47/tonne.

Although those three feedstocks represent a smaller portion combined than ethane, those steep increases led to higher production costs for most ethylene producers.

Buyers, however, continued to argue that margins on ethylene for producers remain robust and that higher ethylene costs will make downstream derivatives uncompetitive in the export market.

US ethylene contracts typically settle toward the start of the month for the previous month.

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 = €0.76)

By: John Dietrich

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