High ethylene prices in US could move further up

05-Apr-11

Already at an 11 month high, US spot ethylene prices could reach as high as 70 cents/lb on healthy demand from the vinyls and glycol markets, as reported by Platts. Price of 70 cents/lb seems achievable as demand is fairly strong and inventories are low. Further proof of ethylene's strength came Monday as market participants confirmed March contracts were settling at 53.75 cents/lb, up 4.75 cents/lb from February. Higher prices have been supported by surging crude oil and feedstock prices. Feedstock prices have been higher partly due to ongoing logistical issues regarding availability stemming from a February fire at an Enterprise Product Partners storage plant in Mont Belvieu, Texas. Demand is strong ahead of planned turnarounds by ChevronPhillips (ongoing) and LyondellBasell (H2-April). A recent force majeure declaration by Shell, which according to sources has placed customers on 90% allocation through April, also was lending support to stronger values. Higher prices, however, could backfire in the longterm, as it could lead to demand destruction and loss of exports.