US spot ethylene prices continue to surge on supply tightness

HOUSTON (ICIS)–US ethylene prices reached an almost 18-month high on Monday as supply tightness continued to wrack the market.

US front-month July ethylene on the benchmark Williams System traded at 66.00 cents/lb ($1,455/tonne), its highest since a trade at 68.25 cents/lb during the week ended 25 July 2013.

The surge also puts spot ethylene 3 cents/lb higher from two trades at 63 cents/lb on 11 July, the previous day of trading.

Additionally, ethylene on non-Williams systems also rose, with supply concerns the major driver.

A trade was reported at 78 cents/lb on the Mont Belvieu-Other System in Texas, up from a trade at 76 cents/lb on 11 July.

A trade was also heard at 78 cents/lb on the Louisiana-based Choctaw System.

No volumes were available for the reported trades, however.

Sources said that the deals were likely done by consumers, rather than traders looking to get ahead of rising prices.

“It’s too big a gamble to buy that high if you don’t need it,” a source said. “If people had inventories, they’d be selling it at this level.”

The gap of 12 cents/lb between Williams on Mont Belvieu ethylene is well above the typical spread of 1 cent/lb and is the highest the spread has been in 2014.

The premium for Choctaw ethylene is also well above typical levels of 3-5 cents/lb, but has been experienced in 2014, owing to the first-quarter shutdown of the Evangeline Pipeline.

The pipeline restart was expected to ease the gap between Texas and Louisiana ethylene, and narrowed the spread to 6-8 cents/lb in June.

However, several major delayed cracker restarts, coupled with at least one cracker going down recently and another set to, have tightened supply in the all parts of the US Gulf and led to the spike in pricing.