US Nov ethylene reaches full settlement at 2.8% increase

06 December 2013 17:31 Source:ICIS News

HOUSTON (ICIS)--US November ethylene contracts reached a full settlement at an increase of 2.8% on higher spot prices, sources confirmed on Friday.

The increase of 1.25 cents/lb ($28/tonne, €20/tonne) puts November contracts at 46.25 cents/lb.

The increase came despite calls for a rollover from buyers and other market participants.

The average spot ethylene price for November moved up to 52-53 cents/lb from 45-46 cents/lb in October.

This was largely on the back of bargain buying and some pre-buying, as sources expect tighter supply in early 2014 will lead to higher prices.

Additionally, the impending return of the Evangeline Pipeline to full rates has narrowed the gap between the oversupplied Williams System and the undersupplied Choctaw System.

Sources said October ethylene prices were artificially lowered by longer supply on the benchmark Williams System because of the pipeline issues.

With full rates expected to return, prices are expected to increase on the Williams System because ethylene producers in Texas can sell to their desired locations, opening up the market to more buyers.

The increase in Williams ethylene has been largely matched by a decrease in Choctaw ethylene, as supply is increasing.

Ethylene production costs fell in November as ethane, butane and naphtha prices dipped, while propane was slightly higher.

Market players agreed that demand for ethylene derivatives such as polyethylene (PE) and polyvinyl chloride (PVC) is softer on seasonal factors.

US ethylene contracts typically settle 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 = €0.73)

By John Dietrich