US spot ethylene falls to 16-year low amid tariff concerns

HOUSTON (ICIS)–US spot ethylene traded at a 16-year low on Friday amid long supply and concerns about proposed Chinese tariffs on chemicals.

Front-month April ethylene traded at 14.25 cents/lb ($314/tonne) on Friday, its lowest point since 14.00 cents/lb in March 2002.

Ethylene values had been trending lower in the first quarter as supply had outpaced demand. Good production and new cracker capacity had outweighed consumption amid a slow ramp-up for new downstream polyethylene (PE) capacity and production issues for existing PE plants.

Ethylene prices had ticked higher in late March as downstream consumption rebound amid resolved PE production issues and increasing operating rates for new PE plants.

However, China’s inclusion of some grades of PE in proposed tariffs had stoked fears that planned expansions in ethylene and PE would leave ethylene oversupplied.

Much of the new capacity for ethylene and PE is being built on the premise of exporting the PE to capitalise on the advantage of low-cost ethane feedstocks in the US.

Domestic demand growth is not expected to be able to absorb the increased capacity. Asian markets, particularly China, have been expected to be the primary targets for US PE exports.

Spot ethylene traded at 16.00 cents/lb earlier this week, falling to levels from mid-March when prices hit a nine-year low.

Major US ethylene producers include Chevron Phillips Chemical, DowDuPont, ExxonMobil, INEOS Olefins & Polymers, LyondellBasell and Shell Chemical.