US Aug ethylene contracts settle up amid tight supply

03 September 2016 00:01 Source:ICIS News

HOUSTON (ICIS)--US ethylene contracts for August were assessed on Friday at an increase of 2.75 cents/lb because of the recent surge in spot prices and an overall drop in cash costs, although the settlement was not agreed to market-wide.

Most contracts were settled on Thursday, but one producer was said to be holding out for a greater hike. Nevertheless, many market participants have considered August contracts as settled at 33.00 cents/lb, up from 30.25 cents/lb in July.

The settlement puts contracts at their highest level since June 2015, when prices were agreed at 33.75 cents/lb.

The increase was mostly a result of higher spot pricing, driven by supply tightness amid ongoing turnarounds and unexpected outages.

Front-month spot ethylene traded in August at 30.75-39.50 cents/lb, up from 24.50-30.00 cents/lb in July.

Sources said that weighted average spot prices were up by about 6.5 cents/lb month on month.

A heavy cracker maintenance period in the spring has limited availability and drawn down inventories.

Two units remain in turnarounds, and two others are scheduled to shut down this month for planned maintenance. A number of unexpected outages have further tightened supply, keeping upward pressure on ethylene prices.

Nevertheless, the impact of higher spot pricing was partially offset by lower cash costs, which sources said were down by more than 1.5 cents/lb month on month.

Overall prices for main feedstock ethane were lower in August when compared with July, even with the previous week’s rebound in values.

Additionally, cracker co-products credits had strengthened on higher prices for propylene, butadiene (BD) and benzene, lowering cash costs.

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

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

Major US buyers include Axiall, Occidental Chemical and Total.

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US Aug ethylene contracts settle up amid tight supply

By Tracy Dang