US May ethylene contracts likely to fall slightly

Market sources point to lower spot prices and higher cash costs even as supply remains tight with three or four crackers shut for turnarounds. (Image: Shell Chemical)

HOUSTON (ICIS)–US ethylene market participants are expecting May contracts to settle in the coming days at a slight decrease, mostly because of lower spot prices and higher cash costs.

Sources pegged a May contract price drop of less than 1 cent/lb ($22/tonne) from the April settlement of 30.5 cents/lb.

Supply remains on the tight side as three or four crackers remain shut for scheduled turnarounds.

However, Chevron Chemical Phillips restarted its Sweeny 24 cracker in early May, and INEOS is expected to resume production at its Chocolate Bayou 1 cracker around this time.

Improving supply has enabled front-month ethylene spot prices in May to remain mostly steady around 25 cents/lb, compared with levels in the mid-to-high 20s cents/lb in April, when most of those turnarounds began.

Sources said that average spot prices are down by more than 2 cents/lb month on month.

However, the overall drop in spot pricing is expected to be partially offset by the increase in cash costs, which sources said are up by about 1.5 cents/lb.

Overall costs for main feedstock ethane have risen month on month, supported by strong demand and higher natural gas futures.

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

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

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

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