US February ethylene contracts expected to roll or fall slightly

HOUSTON (ICIS)–US February ethylene contracts are expected to settle at a rollover or slight decline, sources said on Monday, tracking weaker spot prices and higher production costs.

“Odds are that the contract settles flat,” a market source said. “Sellers have had most of the leverage for a while now.”

Ethylene production costs rose 3-5 cents/lb ($66-110/tonne) during February, tracking high prices in feedstock ethane, which hit its highest since May 2012.

Other natural gas liquid (NGL) prices were also high during February, and co-product credit values were largely steady.

However, the surge in production costs was more than balanced by weaker spot prices, which fell to 51-52 cents/lb in February from 57-58 cents/lb in January.

Spot price weakness largely stemmed from high inventories in the US, as well as softer demand because of several downstream plant issues.

With sellers looking to keep contract prices closer to spot prices, a rollover in February would keep the gap at around 2 cents/lb.

The January US ethylene contract settled at 50.25 cents/lb, while spot prices ended February at around 52.00-52.50 cents/lb.

US ethylene contracts typically settle at the start of the month for the previous month.

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

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