PetroChem Wire: July NYMEX Ethylene Prices Drop

Building block chemical's 15% percent price decline defies crude market gains

Jun 25, 2010, 09:25 ET from PetroChem Wire

HOUSTON, June 25 /PRNewswire/ -- U.S. ethylene prices fell in June, with the July New York Mercantile Exchange's (NYMEX) cleared ethylene settling and expiring at $0.34 per pound. The contract, which began trading in July 2009, settled for June last month at $0.40 per pound.

Ethylene trades in 100,000-pound lots per contract on the NYMEX's Clearport system and is a building block chemical used in the production of plastic resins and a variety of solvent chemicals, all used in major consumer manufacturing products.

In the overall cash markets, July ethylene has been trading in the $0.33 per pound range at the start of June, dipping to $0.30 per pound by June 18th before staging a rally back up to $0.34 per pound, according to PetroChem Wire (PCW), a daily U.S. petrochemical industry newsletter. PCW's cash market assessments are used to settle the cleared NYMEX contracts.

Typical ethylene deals are a minimum of 3 million to 5 million pounds in size, or 30 to 50 lots per trade. So far in June, more than 400 million pounds of ethylene have traded in the spot market.

"The ethylene market disconnected from energy trends during June, once again proving that petrochemical pricing is not an automatic function of energy markets," said Kathy Hall, executive editor of PCW. "We also continue to see ethylene trading out as far as 2011, which underscores the growing interest in using ethylene markets to manage price risk in polyethylene and finished goods markets."

While ethylene directionally followed energy markets during May, its 15% price drop between June and July contract settlements was opposite of trends seen in crude and natural gas. The NYMEX WTI futures contract was up 13.5% from June to July. The July natural gas contract, which expires June 28th, has been trading around $4.75/mmBtu, which is 14% higher than where the June contract expired. Ethylene can be produced using raw materials that are derived from both crude oil and natural gas, such as ethane. Ethylene has been far more volatile than ethane. Ethane prices have fallen around 12 cents per gallon since early June, to around 45 cents per gallon--a drop of 20%.

Maximum steam cracker operating rates in the U.S. Gulf was nearly 95% during June, the highest they have been since November of 2009. Maximum operating rates were at 92.8% for steam crackers in Texas and 100% in Louisiana, a combined rate for the region of 94.6%. By comparison, maximum steam cracker operating rates a year ago were around 75%, and spot ethylene was trading at $0.25 per pound.

The PetroChem Wire is a daily newsletter serving the petrochemical industry. It counts every major petrochemical and refining company among its readers, as well as many major manufacturing concerns, global conglomerates, industry consultants, equity analysts and government agencies.  

SOURCE PetroChem Wire