Ethylene suppliers seek 7¢/lb increase in contracts

By Tom Stundza -- Purchasing, 4/2/2008 9:51:00 AM

Contract proposals for key feedstock chemical ethylene are around 59¢/lb this week because producers have been tightening supply by operational cutbacks. Spot prices aren’t that high yet.

The chemical cost 48¢ in February and moved up to 52¢ in March as regional demand has begun to improve after a lengthy downward trend. However, some buyers say first-half demand will turn out to be rather soft overall. In fact, one buyer tells petrochemicals subscription news service ICISpricing.com that the early-April spike “is a short-term factor due to supply being taken offline in response to weak demand for the monomer.”

U.S. ethylene output in February totaled 4.26 billion lb, a 9% drop from 4.68 billion lb in January, according to an industry survey. Ethylene production in February was 147.1 million lb/day, down by 2.7% from 151.2 million lb/day in January. Operating rates of U.S steam crackers averaged 85.3% in February, down from 87.6% in January.

The jump in spot ethylene prices may have come from market sentiment that March inventories were tighter than previously estimated but that view could turn out to be immaterial because of weak second-quarter buying.

Chevron Phillips Chemical reportedly has reopened its Sweeny 22 ethylene unit in Texas, which was shut March to repair a damaged compressor associated with the 296,000 metric ton/year cracker. Also down in March was the BASF/Atofina 936,000 metric tons/year steam cracker in Texas that was taken offline to fix a problem with its water processing tower.