Improved demand in Asia, higher energy costs and unscheduled plant shutdowns are prompting buyers to stockpile to avoid higher prices later as per an analyst report. As demand rebounds, prices for ethylene and related resins could rise in the third quarter. After sliding by 39% in 2005, spot ethylene prices seem poised to rise. US ethylene producers who cut output to 88% of capacity to trim inventories in Q2, will boost operating rates to 92% in Q3. A continuation of healthy economic activity, especially in North America and emerging markets is necessary for this 'turnaround' to fully materialize.
A seasonal pickup in demand has boosted Asian spot ethylene by over US$250 per metric ton, a 42% gain from a recent low of $600, as per Merrill Lynch. Spot US prices for ethylene, recorded the biggest weekly gain since September 3, jumping 9.1% for the week ended July 8. Spot prices for polyethylene, gained US$15, or 1.7%, to $902.50 a metric ton as of July 8. Producers are cutting costs by switching to natural-gas-based ethane as a raw material rather than petroleum liquids.
Factors contributing to the tightening supplies are water shortages that could potentially cut ethylene output in Thailand, maintenance at an Exxon Mobil Corp plant in Singapore, and unplanned shutdowns in North America. Dow shut a plant in Texas on June 29 for 3-5 weeks due to an equipment failure, and Calgary-based Nova Chemicals Corp on June 21 cut production to 40% at its largest ethylene plant after a tornado curtailed ethane supplies in Joffre, Alberta.
Markets are also expected to tighten as planned maintenance in October removes about 7% of North American ethylene capacity and 13% of Chinese capacity
18-Jul-05 
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