US front-month ethylene prices falling, still higher year on year

HOUSTON (ICIS)–US front-month October ethylene spot prices fell on Friday to early-July levels, but remain 31% higher year on year.

Front-month October ethylene traded at 58.25 cents/lb ($1,284/tonne), its lowest since a trade done at 58.00 cents/lb on 7 July.

This puts spot ethylene down 25% from its peak hit in the second half of September, on extreme supply tightness.

Weaker spot ethylene is mostly being attributed to improving supply, as a major cracker was restarted this week and several more are expected to restart in the next month.

Currently, around 10% of available capacity remains down, mostly because of unplanned outages.

The decline in spot ethylene prices is expected to lead to a boost in demand, but polymers producers are likely to be wary of a rebound, especially because of ethylene inventory levels.

Low inventory levels have kept the market on a tight edge, sources said, and any unplanned outages in November or December could push spot prices into the mid-60s cents/lb.

This would return US polymers prices to levels that are unattractive to overseas buyers, especially in the current climate of weaker energy values.

US spot ethylene prices, despite falling in recent weeks, are still 31% higher year on year from the 45-47 cent/lb level at the end of October 2013.

The improved production rates expected in November and December could leave to inventory building for non-producers, even as year-end taxes are assessed.

However, desire to avoid year-end taxes could push back any inventory building into the start of 2015.