HOUSTON (ICIS)--US ethylene contracts for June have settled for most participants at a decrease of 2.75 cents/lb from the prior month amid strong production, although the agreement is not marketwide, sources said on Thursday.
Most participants agreed to a June contract price of 30.50 cents/lb ($672/tonne), down 8.3% from 33.25 cents/lb in May.
However, at least one participant did not accept the June contract price.
The decline was largely due to lower spot prices and cash costs in June. The average front-month ethylene spot prices in June was lower by about 4 cents/lb than the prior month, while cash costs were lower by about 1 cent/lb, market sources said.
Spot prices have been falling for several weeks, following the restarts of several crackers after spring turnarounds or unplanned outages. Few production issues were heard during June to hamper production rates. Two US Gulf crackers were offline in the last week of June, although impact to ethylene supply was minimal as the outage also involved downstream units.
Recent ethylene capacity increases also have contributed to strong production, including two new crackers in Texas and expanded crackers in Texas, Louisiana and the Midwest.
Meanwhile, demand has been less than expected. The downstream polyethylene (PE) sector, the largest consumer of ethylene, has been hampered by high inventories.
Front-month spot prices ranged 23.0-28.0 in June, compared to 26.5-30.5 cents/lb in the prior month.
Ethylene spot prices have continued falling into July, with the most recent front-month July trade on Wednesday at 21.25 cents/lb.
The lower cash costs for ethylene production also contributed to the lower contract prices. Prices for ethane, the primary feedstock for ethylene production, in June were about 1 cent/gal lower in June than in the prior month, according to ICIS assessments.
Major US ethylene producers include ExxonMobil, INEOS, LyondellBasell and Shell Chemical.
Major US buyers include Occidental Chemical and Westlake Chemical.