HOUSTON (ICIS)--Initial settlements for US April and May ethylene are at a decrease of 1.5 cents/lb and 0.75 cent/lb, respectively, tracking lower spot prices, market sources said on Monday.
If accepted by the market, the double-month settlement would put April ethylene contracts at 26.75 cents/lb ($590/tonne) and May at 26.00 cents/lb.
March ethylene contracts had settled at 28.25 cents/lb.
US ethylene contract prices typically settle at the start of the month for the prior month. The market had been unable to reach a settlement for April contracts.
Ethylene contracts last had a double-month settlement following Hurricane Harvey, when the August contract was delayed amid disruptions from the hurricane. August contracts settled alongside September contracts the following month.
In April and May, the ethylene market was under pressure from long supply and less-than-expected demand due to new capacity coming online.
Since late 2017, about 3m tonnes/year of new ethylene capacity and about 3.5m tonnes/year of new polyethylene (PE) capacity has started up. The new crackers have been running well, but several of the new PE plants have struggled to reach full operating rates.
The resulting imbalance had led to supply length in the ethylene market and pushed ethylene spot prices to historic lows. Spot ethylene was assessed at 12.00-12.50 cents/lb in the week ended 11 May, its lowest point since January 1999.
Spot prices had rebound slightly in the second half of May, following the idling of a cracker and stronger PE operating rates in March and April.
Front-month ethylene spot prices in April were 13.00-17.50 cents/lb, compared with 16.0-22.0 cents/lb in March. Front-month ethylene spot prices in May were 12.00-15.25 cents/lb.
A full settlement is pending further confirmation from market participants.
Major US ethylene producers include ExxonMobil, INEOS, LyondellBasell and Shell Chemical.
Major US buyers include Occidental Chemical and Westlake Chemical.