US ethylene rises but still most competitive

During the course of last week, spot ethylene prices were pushed higher in the United States by production issues stemming from a fire at Enterprise’s natural gas liquids production and fuels storage facility on Tuesday, February 8. As per Chemorbis, despite the boost to the spot ethylene market, prices in America remain the lowest among the major regions of the US, Europe and Asia. Before Tuesday’s fire, spot ethylene prices had been on an upturn in USA because of unusually cold weather conditions in the Gulf Coast affecting several crackers in the region. This reportedly brought out some buyers looking for material in the first week of February while supply was reduced due to lowered operating rates at some crackers in the Gulf. In the last week of January, spot ethylene prices had been at a level as low as US$950/ton FD USG before moving up to a level hovering around US$1040/ton at the end of the first week of February. Following the fire on Tuesday, US players reported hearing deals in a range of US$1047-1058/ton. The market mostly stabilized following the news and settled at a range of around US$$1050-1060/ton by the end of the week. Despite the fact that prices are up around US$100/ton compared to the last week of January, US ethylene prices are still the most competitive. US ethylene prices are US$250-260/ton below Asian ethylene prices and around US$450/ton under spot European prices. This makes the theoretical production costs of American PE well below its counterparts in Europe and Asia. This brought American PE offers all the way to Turkey despite its 6.5% disadvantage for customs duties relative to the more prominent Middle Eastern origins sold in the country with just 3% duties. One Turkish buyer reported purchasing American LDPE film earlier in February at US$1660-1670/ton CFR Turkey, subject to 6.5% duty, cash basis. He commented that he was purchasing the material because he expected PE prices to rise further in the days ahead. The US LDPE was also amongst the most competitive in the market, along with Iranian origin, even after adding the higher customs duties. With an estimated freight rate from the US to Turkey of around US$100/ton, this would bring the LDPE film price to US$1560-1570/ton ex-USA. A trader in China received the same offer for American LDPE film at US$1670/ton CFR Shanghai, China, L/C at sight last week. With similar freight rates from the US to China, the netback value is the same at around US$1570/ton ex-USA compared to the sale to the Turkish market. Also in China, a trader is offering American LLDPE c4 film at US$1430/ton CFR Eastern China, cash, which nets back to the US at around US$1330/ton. A trader in Turkey is offering American HDPE film at US$1400-1420/ton CFR Turkey, subject to 6.5% duty, cash. He noted that he sold out his Middle Eastern materials and has turned to alternative supply sources to supply the market. A different trader reported selling out his allocation of American HDPE blow moulding to the Turkish market at US$1410/ton with the same terms. This puts HDPE prices at around US$1300-1320/ton from the US after deducting freight rates.