US January ethylene fully settles up 4.1% on higher feedstocks

HOUSTON (ICIS)–US January ethylene contracts have fully settled up 4.1% on higher feedstock costs, sources confirmed on Friday.

January ethylene contracts settled at 50.25 cents/lb ($1,108/tonne), up by 2.00 cents/lb from the December settlement of 48.25 cents/lb.

The settlement puts contract prices at their highest since settling at 55.25 cents/lb in April 2012, which was also the last time contracts broke the 50.00 cents/lb level.

Much of the increase was attributed to higher production and feedstock costs, especially for ethane.

US ethane prices surged during the month because of strong demand for heating usage in much of the US.

The spike in ethane was bolstered by increases to other natural gas liquids (NGLs) propane and butane.

The feedstock costs, coupled with steady pricing for cracker co-product credits, led to ethylene cash costs hitting their highest since April 2012.

Ethylene spot prices also rose during the month, gaining an average of 2 cents/lb to move to 57-58 cents/lb.

Most of the spot ethylene buying was attributed to consumers wanting to build inventories ahead of several planned cracker turnarounds in the late first quarter and early second quarter.

Overall demand was steady to slightly stronger, sources said, but new demand was not a major driver for higher contract prices.

Ethylene producers were pushing for a 2.5-3.0 cents/lb in January contracts before spot prices slipped in the last week of the month on high inventories.

The increase in the settlement also puts the contract price closer to current spot price levels, which are in the low 50s cents/lb, something producers had been seeking.

Ethylene contracts typically settle at the start of the month for the previous month.

Major ethylene producers include Chevron Phillips (CP Chem), ExxonMobil, INEOS, LyondellBasell and Shell Chemical.

Major buyers include Axiall, Dow Chemical, Occidental Chemical and Total.