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Thursday, August 11, 2022

US spot ethylene hits 3-month low, nears important level for buyers

US spot ethylene dropped to a three-month low Tuesday, nearing the point some sources have said would increase buying from downstream users.

The assessment for front-month product reached 61.25-61.75 cents/lb FD USG for October delivery, the lowest since July 10, when it was assessed at 59.50-60 cents/lb FD USG. The assessment has fallen nearly 15 cents since it was 76-76.50 cents/lb FD USG on September 19 — that was its highest level since Platts began assessing US spot ethylene on July 26, 2004.

After the close of the assessment window on Tuesday, two trades were heard at 60 cents/lb Mont Belvieu Williams pipeline basis. Some US-based polyethylene producers have said ethylene prices would need to be at or below that price for any chance of increased activity in the US resin export market.

US export PE pricing is generally set by global markets and disconnected from movements in USG ethylene spot prices. Sources have said upstream production issues that have limited feedstock ethylene supply and increased ethylene prices in the US Gulf have greatly reduced export PE availability. Those issues helped drive FAS Houston pricing to a level that is not competitive against pricing from regions like Asia, the Middle East and even Europe, sources said.

“Unless spot ethylene goes below 60 (cents/gal), it’s hard to imagine US producers will have interest to produce more (polyethylene) to compete in export,” a US based trader source said this week.

Export PE prices were assessed Tuesday at $1,643-$1,665/mt FAS Houston for both high density polyethylene blowmolding and linear low-density polyethylene, and $1,731-$1,753/mt for low-density polyethylene.

Sources in other derivative markets, including polyvinyl chloride, monoethylene glycol and styrene, have said the higher ethylene prices were also contributing to higher spot prices, which have limited export activity. PVC market participants in the US have cited the ethylene costs as a driving factor in the limited activity across the PVC chain. Recent ethylene prices created a gap between bids and offers that has not closed, as producers resisted selling below cost and buyers struggled to find end-users who can support the prices. US PVC export prices were assessed Wednesday at $900-910/mt FAS Houston.

Market sources have attributed the recent fall in spot ethylene prices to the return and impending return of various downed production units. On Tuesday, ExxonMobil started its Baytown Olefins Plant after a six-week planned maintenance, the company said, bringing its 960,000 my/year steam cracker back on line. Earlier in the month, LyondellBasell completed the 362,800 mt/year expansion at its La Porte, Texas, site to bring the plant’s ethylene capacity to 800,000 mt/year, market sources said.

Market sources also expect Chevron Phillips Chemical to restart its 300,000 mt/year ethylene unit No. 22 at its Sweeny complex in Old Ocean, Texas, within the next two weeks. And Williams Olefins has the restart of its Geismar, Louisiana, steam cracker set for this month, which includes a planned expansion to increase capacity to nearly 900,000 mt/year.

– Platts.com

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