US August ethylene contracts fully settle up 1.1% from July

05 September 2013 20:38  [Source: ICIS news]

US August ethylene contracts fully settle up 1.1% from JulyHOUSTON (ICIS)--US August ethylene contracts reached a full settlement up 1.1% from July, buyers and sellers confirmed on Thursday.

US August ethylene contracts settled at 46.0 cents/lb ($1,014/tonne, €771/tonne), up from the July settlement of 45.5 cents/lb.

The settlement was slightly lower than some projections, which called for an increase of 1-2 cents/lb based on higher feedstock costs.

“If you look at the overall mix, ethane is about 70%, but the rise in other stuff has had an effect,” a producer said. “Weighted cash costs went up a few cents, and that’s expected to continue into September.”

While feedstock ethane costs were largely steady in August at around 26-27 cents/gal, other feedstocks have increased, supported by higher global crude oil futures.

US propane prices increased by 25% in August from July, paraffinic naphtha was up by 7.8%, and normal-butane prices increased by 12%.

The increase in cash costs was somewhat softened by weaker spot prices in August from July, down by an average of roughly 0.75 cents/lb.

Additionally, ethylene supply improved in August as several crackers were restarted and operating rates were strong.

“Inventories are getting pretty long,” another producer said. “Prices will likely fall by the end of the year.”

Market players said the current gap between contract prices and spot prices remains too high, although a recent downturn in spot prices is narrowing the gap.

Ethylene demand is expected to soften in through the rest of the year as the peak building season and US winter holiday pre-build are completed.

US ethylene contracts are typically settled at 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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