PetroChem Wire: U.S. Petrochemical Prices See Big Gains in Q1

Building block chemical ethylene leads surge

Apr 14, 2011, 08:15 ET from PetroChem Wire

HOUSTON, April 14, 2011 /PRNewswire/ -- Prices all along the U.S. petrochemical chain moved higher during the first quarter of 2011, but none more dramatically than ethylene, according to PetroChem Wire (PCW), a daily U.S. petrochemical industry newsletter. PCW's cash market assessments are used to settle the cleared NYMEX ethylene contracts.

Ethylene, a building block chemical, saw spot market prices soar 43.7 percent between the start of January and the end of March 2011. During that time, NYMEX WTI crude futures prices gained 16 percent and ICE Brent futures were up 26 percent.

Ethylene prices, which started 2011 near their 5-year average price of 42 cents per pound, ended the quarter at 60.75 cents per pound. This nearly 20-cent gain far outpaced its feedstock markets. Ethane, which is the most popular raw material used for ethylene production, saw its prices gain 14 percent during the first quarter, rising from 64.3 cents per gallon to 73.5 cents per gallon. Other ethylene feedstock markets saw even smaller gains, such as propane, which gained 2 percent during the quarter.

"While rising energy prices lent support to ethylene's spike during the quarter, supply-demand economics really drove the market," according to Kathy Hall, executive editor of PetroChem Wire. "Maximum ethylene plant operating rates were relatively high—greater than 90 percent. However, logistical constraints and strong U.S. demand for plastic resins kept inventories low, and pulled ethylene prices to the levels we saw."

Other building block chemicals also saw first-quarter gains. Refinery grade propylene prices were up 6.3 percent, moving from 71 cents per pound to 75.5 cents per pound. Benzene prices were relatively steady, gaining 4 percent during the quarter from $3.86/gal to $4.03/gal. Like ethylene, propylene and benzene are used in the production of plastic resins and a variety of solvent chemicals, all used in major consumer manufacturing products.

Downstream plastic resin markets experienced price gains across the board but in varying degrees. Despite the spike in ethylene prices, polyethylene prices moved up between 5 percent and 9 percent. Film grades of polyethylene, such as linear low-density PE used for stretch wrap production, started 2011 at 65 cents per pound and had reached 71.5 cents per pound by the end of March. Polypropylene only saw gains of 2.4 percent during the quarter, from 83 cents to 85 cents per pound. Polystyrene prices jumped 12.8 percent during the quarter from 78 cents to 88 cents per pound.

So far in the second quarter, a brief extension of gains was seen for ethylene, but prices sold off during the second week of April, trading down to 58 cents before finding some stability around the 59-60 cent level. Propylene saw continued gains, moving from 75 cents to 81 cents per pound, while benzene prices steadily hovered around the $4/gal mark.

"With some supply issues appearing to become somewhat alleviated for the base chemical markets, the next few weeks may show a sharper reflection of demand for downstream chemicals, particularly plastic resins," Hall said. "In addition to global demand for U.S. products, which is based on relative pricing and arbitrage opportunities, the warmer months typically bring a renewed domestic market demand in the U.S., from construction sectors, as well as leisure-related markets such as disposable food and beverage containers and utensils."

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