HOUSTON (ICIS)--US May ethylene contracts settled for the majority of participants at an increase of 3.5 cents/lb on higher spot prices and cash costs.
The settlement puts May contracts at 24.0 cents/lb ($529/tonne), up from 20.5 cents/lb in April.
The settlement marks the first increase since October, when cracker outages and delayed start-ups prompted ethylene prices to rise.
Front-month ethylene traded in May at 10.125-12.750 cents/lb, up from 8.000-9.000 cents/lb in April.
Spot prices rose as higher feedstock ethane prices outweighed coronavirus-weakened demand.
US ethylene demand is expected to be weakened through much of 2020, though there is optimism for recovery in 2021.
Average cash costs increased by about 4 cents/lb month on month as drilling cuts caused ethane prices to rise on reduced supply.
A large proportion of ethane is recovered as associated gas from wells drilled in shale basins to pump oil or natural gas, so a decline in drilling activity can reduce ethane production.
Despite rising prices, ethane has remained the preferred US ethylene feedstock due to a lack of outlets for the co-products created by cracking other feeds such as propane, butane and naphtha.
Ethylene is a key petrochemical feedstock, used to make polyethylene (PE), ethylene glycol (EG) and polyvinyl chloride (PVC) among other products.
Major US ethylene producers include Chevron Phillips Chemical, Dow, ExxonMobil, INEOS Olefins & Polymers, LyondellBasell and Shell Chemical.
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