US Jan ethylene contracts expected to increase on ethane costs

HOUSTON (ICIS)–US January ethylene contracts are expected to increase on higher production costs and spot prices, sources said on Monday.

Most market sources are expecting an increase of 1.5-2.5 cents/lb ($33-55/tonne) for January contracts.

December contracts settled at 48.25 cents/lb and, if the increase is as much as expected for January, it could put ethylene above 50.00 cents/lb for the first time since April 2012.

Production costs for ethylene in January were at their highest since April 2012, owing to feedstock ethane reaching a two-year high.

The surge in ethane was compounded by increases in other NGLs such as propane and butane, mostly on demand for heating usage.

Ethylene spot prices in January also increased, up to 57-58 cents/lb from 55-56 cents/lb in December, tracking the rise in feedstock costs.

Sources said demand was also strong in the polymers markets and that supply was balanced for most of the month.

Ethylene contracts are typically settled at the start of a 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.