US Aug ethylene contracts expected to be part of two-month deal

HOUSTON (ICIS)–US August ethylene contracts appear set to be part of a two-month settlement, sources said on Monday.

Buyers and sellers said they do not see a full agreement being reached for August anytime soon, with some deals heard at an increase of 1.75 cents/lb ($39/tonne) and some being done at an increase of 2.00 cents/lb.

At the close of the previous week, sources were confident that a full market settlement would get done at an increase of 1.75 cents/lb from the July settlement of 49.50 cents/lb.

However, several producers said they had secured settlements up 2 cents/lb or were holding out for an increase at that level.

Buyers said that the increase of 1.75 cents/lb is more reflective because it does not include several spot trades done late in August at 28-month highs.

“We were fine at up 1.75 cents/lb,” a US buyer said. “We are not going up to 2 cents/lb.”

Sources said that several spot trades done above 70 cents/lb at the end of August were for small volumes and were purchased by a producer who was building inventory.

Spot prices are starting to slide in the US as supply concerns have eased slightly, and high prices have led to some demand destruction.

Additionally, high prices for cracker byproducts propylene and benzene, as well as cheap feedstock costs, are keeping ethylene production costs low.

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

Major US producers include Chevron Phillips, ExxonMobil, INEOS, LyondellBasell and Shell Chemical.

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