US PE Producers Announce Increases on Ethylene Volatility
2019-09-26    [Source:OPIS]

 US polyethylene (PE) producers have an active 5 cents/lb increase issued for September contracts and many have issued a further increase of 8 cents/lb for October. Whether the moves would boost or merely protect margins is hard to say given the erratic pricing of feedstock ethylene.

Spot ethylene prices in the Mont Belvieu area began September in the low 20-cents/lb zone, even dipping below 20 cents/lb on 5 September before steadily rising to 25.25 cents/lb by mid-month and reaching 27 cents/lb on 18 September. By the time the PE producer letters began rolling out for October, however, spot ethylene had changed direction, drifting down toward 25 cents/lb. On the morning of 25 September, October Mont Belvieu ethylene traded multiple times at 24 cents/lb, a new low for the month.

Feedstock natural gas liquid (NGL) prices have been difficult to predict. Mont Belvieu ethane prices started September averaging above 20 cents/gal -- highs not seen since early June -- as new and steam cracker capacity drove up demand, reaching a mid-month average peak of 23.6875 cents/gal. Yet supplies of ethane are still considered ample, and prices have backed off, falling into the range of 19-20 cents/gal on the morning of 25 September.

Propane and normal butane at Mont Belvieu have been more sensitive to the energy market. Non-TET propane climbed from 39.8125 cents/gal to 50.0625 cents/gal during the first half of September, including a 7-cent surge on 16 September, the first day of trading following the drone attacks on Saudi crude production. The most recent price was 45 cents/gal. Non-TET normal butane peaked at an average 59.875 cents/gal on 16 September, up from around 50 cents/gal at the start of the month, and they were last seen around 55 cents/gal.

Ethylene supply has not necessarily been tight. Most plants have been operating well, and Tropical Storm Imelda appears to have had only minor impact on petrochemical production. However, postponed startups of new capacity have injected uncertainty into the ethylene market.

Spot PE prices have been largely indifferent to the upstream price swings, however, with blow molding grade high-density polyethylene (HDPE) staying firmly in the low to mid 30s cents/lb range, and butene film grade linear low-density polyethylene (LLDPE) staying in the low 30s cents/lb so far this month. 

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