US ethylene prices sliding back in line with prices in Europe, Asia

23-Apr-10
After opening the month of April with a large premium over prices in Europe and Asia, US ethylene prices are losing their premium over these regions as May approaches, as per Chemorbis. European contracts have rolled over for May while spot prices in Asia are firming up heading into May after losing considerable ground in the month of March. At the beginning of April, US spot ethylene prices held a premium of US$435/ton over spot prices in Europe and US$395/ton over spot ethylene prices in Northeast Asia. In the first week of April, spot prices in the US soared by US$115-155/ton as fears of reduced availability owing to some turnarounds in the country that prompted buyers to conclude deals. Higher spot ethylene prices created difficulties for American PE exporters, as they found themselves unable to compete with mainstream Asian producers in the Chinese market at a time when Asian producers were able to competitively enter the Latin American market. With spot ethane prices down nearly 40% from the peak levels seen in February, operating rates at of US crackers averaging nearly 85% and inventory levels building up, American ethylene prices moved down this week, with downward movement expected to continue into the next month. After losing US$145/ton over the past week, spot ethylene prices have shed another US$70/ton since Monday to bring current spot offers to around US$1390-1400/ton FD USG. At the same time, spot prices in Asia have picked up speed, with late April gains in spot prices erasing the losses recorded over the month of March. Spot ethylene prices in Northeast Asia declined by US$70/ton over the month of March, but have gained US$120/ton from the beginning of April. Since Monday, spot prices on a CFR Northeast Asia basis have moved up US$20/ton on the week to reach US$1270/ton CFR Northeast Asia. Tight supplies were cited as the main factor supporting higher ethylene prices as a number of Asian crackers are currently undergoing turnarounds. This rise in ethylene costs now has Asian PE producers facing difficulty making sales, as buying interest in Asia’s PE markets is generally too weak to support prices capable of covering producers theoretical costs based on spot ethylene values. Meanwhile, the European ethylene market has remained largely stable on the week as sellers have been able to take advantage of unexpected export opportunities to Latin America to keep their inventory levels balanced with regional demand. From the start of April, spot ethylene prices are up around €20/ton (US$27/ton). With supply and demand dynamics remaining largely in balance in the European market, the May contract price was settled with a rollover from April.
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