SAN ANTONIO (ICIS)--Ample availability could continue to weigh on the US ethylene market unless supply tightens from unexpected plant outages, according to participants heading into this weekend’s International Petrochemical Conference (IPC).
Despite US ethylene contracts settling at increases in January and February on the overall rise in spot prices, March contracts are headed for a decrease of several cents/lb as front-month values have returned to levels seen before the start of the year.
Spot prices climbed in early 2017 as supply became tighter than anticipated.
While two cracker turnarounds were scheduled for the first quarter, one unit shut down ahead of expectations. This and a number of unplanned production issues prompted front-month values to surge to 38 cents/lb ($838/tonne) in early February.
However, that pressure began easing as supply improved.
In February, Occidental Chemical (OxyChem) and Mexichem announced the start-up of their new joint venture cracker in Ingleside, Texas.
The cracker has an ethylene capacity of 1.2bn lb/year (544,000 tonnes/year) and will provide OxyChem with feedstock for the production of vinyl chloride monomer (VCM). Mexichem will use the VCM to produce polyvinyl chloride (PVC) resins and pipe.
Meanwhile, there were no reports of unexpected production issues that would have significant impacts on ethylene availability, and market participants were able to rebuild inventories.
Front-month ethylene began trading lower, and a five-week downtrend put spot prices at a low of 25.25 cents/lb, a drop of 34% from early February.
Since then, spot prices have rebounded on a couple of unplanned plant outages but remain in the mid-to-high 20s cents/lb.
Still, the month-on-month drop in overall spot prices, as well as decline in cracker cash costs, are leading to expectations that March contracts will settled at a decrease of several cents/lb.
Sources anticipate continued pressure on pricing as inventories continue to increase.
Sponsored by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC runs 26-28 March in San Antonio.
Follow Tracy on Twitter