Soaring ethylene prices in USA create premium over Asia, Europe

04-Mar-10

The uptrend in ethylene prices in USA gained pace from the beginning of 2010. As per Chemorbis, after having posted a considerable hike of over US$275/ton in January, spot prices rose by another US$200/ton in February to end the month at US$1290/ton DLVD USG. This uptrend continues in March as spot values saw a massive increase of US$250/ton only in the first two trading days of the week. As of Tuesday, two consecutive done deals were reported at $1543/ton with local terms. The reason triggering these relentless gains in spot values is the persistent and severe tightness in the region. While the US spot values have reached new highs, the trend in Asia has been to the contrary recently. US ethylene prices, which caught up with Asia last week, are now standing US$360/ton above Asia as Asian spot ethylene prices shed another US$40/ton to US$1180-1190/ton CFR NEA in the first three trading days of March above the US$140/ton loss recorded throughout February. The European ethylene market is not very strong either with spot values standing at €820-830/ton (US$1107-1120/ton) FD NEW. Now, the US appears to carry a noteworthy premium of US$420/ton above Europe as well. These massive hikes of ethylene have made their impact on the PE market. As producers raised their local PE prices, an arbitrage window has even been opened between the US and China with Asian producers now considering shipping PE to the US for the first time in a very long time. Spot ethylene prices in the US were characterized as the lowest values compared to other major regions for the most part of 2009. They traded mostly between US$500/ton and US$650/ton during the first 9 months of last year. They even sank to a level as low as US$420/ton last July on DLVD USG basis. On the other hand, the other major regions, namely Asia and Europe, were carrying a premium of more than US$600/ton over the US during the same time period. This extended downward trend in the US reversed direction at the start of the last quarter of 2009. Starting in the month of October with prices at around US$550/ton, spot values gained more than US$250/ton in three months and closed last year with prices at around $815/ton DLVD USG. However, even after the rebound, spot values in this country were still lagging well behind Asia and Europe with a price difference of US$250-350/ton.