Softer spot ethylene and higher production costs push down US ethylene margins

13-Sep-11
US ethylene margins have fallen in the first week of September, pressured by softer spot prices and slightly higher production costs, as per ICIS. Using ethane as a feedstock, ethylene margins were at 31.61 cents/lb (US$697/ton) for the week ended 9 September, down from 34.34 cents/lb a week earlier. This places margins at their lowest level since early August. Last week’s decline can be attributed to a near 4% fall in ethylene spot prices. Ethylene for September traded at 60–62 cents/lb, down from 63-63.875 cents/lb a week earlier, pressured by adequate supply, a slowdown in derivative demand and talk of a delay in a cracker turnaround. Dow Chemical is reported to have deferred a one month maintenance at a 610,000 tpa cracker in Louisiana, originally scheduled for October and putting pressure on ethylene. New schedule for the turnaround is unclear, with sources saying it could be in January 2012 or in the first half of 2013. However, Dow was heard to be selling some ethylene last week, which indicates the turnaround is more likely being moved to 2013 rather than 2012. Some players opine that last week’s fall in spot prices could be supply-driven, as no unplanned shutdowns were heard in the industry. US ethylene output was significantly affected by outages earlier this year, which included as many as 30 unplanned shutdowns between January and August, according to an ICIS assessment. A slowdown in US derivative exports, particularly polyethylene (PE), was also cited as eroding support for the monomer this week. The US exports around 20% of its PE production, but a drop in Asian prices was limiting interest in US material.
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