US September ethylene contracts reach full settlement at rollover

02 October 2013 20:35  [Source: ICIS news]

HOUSTON (ICIS)--US September ethylene contracts reached a full settlement at a rollover, sources confirmed on Wednesday.

The rollover puts US ethylene contracts at 46 cents/lb ($1,014/tonne, €750/tonne).

Sources said the rollover was caused by a balance of weaker spot prices and higher production costs.

The US average ethylene spot price for September was around 53.0 cents/lb, down from the August level of 54.5 cents/lb.

The decline is mostly being fuelled by long supply, softer demand and the shutdown of the Evangeline Pipeline.

Sources said that with the pipeline shut down, ethylene movement from Texas to Louisiana is severely limited.

This has created long supply in the benchmark Williams system, as Texas production facilities cannot move material to their preferred downstream facilities in Louisiana.

Those producers have been forced to sell their long positions, putting downward pressure on spot prices.

The lack of availability of several downstream units from the pipeline issue, as well as several units being down because of production issues, have also dampened ethylene demand.

However, higher production costs balanced the weaker spot market, leading to the rollover, sources said.

US ethane prices were largely steady during September, despite strong operating rates for most US crackers.

Alternative feedstocks such as propane, butane and naphtha were stronger, however, pushing up on the weighted feedstock cost for US crackers.

The increase was roughly 1 cent/lb, sources said, and would have been higher had ethylene co-product propylene prices not moved up.

The longer supply and softer demand has pushed US ethylene contracts down year on year by 4.7% from the September 2012 settlement of 48.25 cents/lb.

US ethylene contracts are usually 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 = €0.74)

By: John Dietrich

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