Mid-month ethylene rally in US fizzles out

The US ethylene market has been trading at a steep discount compared to other global markets due to favorable natural gas prices as opposed to the high naphtha costs seen in Europe and Asia.  At times there has been a staggering difference between the US and spot prices in Asia as seen on the graph below.

In early July, spot ethylene prices hit an inter-year low of 2009 with a done deal as low as $419/ton FD USG. In September, prices lifted once again, but could not hold on at the start of October. Prices bounced up, however, in the middle of October under pressure from higher ethane prices and the increasing trend was sustained for a little over a week giving the impression the market could rally.

At the end of last week, however, the US ethylene market moved back down again due to the absence of buy interest.  A deal was reportedly done near the end of the last week at a level of $672/ton, but could not be confirmed. This was despite the fact that offers had begun last Monday at around $738/ton for October cargoes. Players said the reason the ethylene rally fizzled was the fact that ethane prices moved down at the start of the previous week.  The news that Shell was restarting its cracker at Deer Park, Texas was also blamed for the decline.

With the continued gap between ethylene prices in the US and other major regions even after the recent upward movement seen in October, players continue to report attractive and competitive US PE offers in all of the major spot markets with only the long transit time an obstacle to smooth sales for US PE sellers.