Improving supply weaken US front-month ethylene prices

27-Oct-14

US front-month October ethylene spot prices fell at the end of the previous week to levels seen in early-July, but remain 31% higher year on year, as per ICIS. Front-month October ethylene traded at 58.25 cents/lb (US$1284/ton), its lowest since a trade done at 58 cents/lb on 7 July. With this, spot ethylene has fallen by 25% from its peak seen in H2-September, on extreme supply tightness. Weaker spot ethylene is mostly being attributed to improving supply, as a major cracker was restarted this week and several more are expected to restart in the next month. Currently, around 10% of available capacity remains down, mostly because of unplanned outages. The decline in spot ethylene prices is expected to lead to a boost in demand, but polymers producers are likely to be wary of a rebound, especially because of ethylene inventory levels. Low inventory levels have kept the market on a tight edge, sources said in ICIS, and any unplanned outages in November or December could push spot prices into the mid-60s cents/lb. This would return US polymers prices to levels that are unattractive to overseas buyers, especially in the current climate of weaker energy values. US spot ethylene prices, despite falling in recent weeks, are still 31% higher year on year from the 45-47 cent/lb level at the end of October 2013.