PetroChem Wire: August NYMEX Ethylene Prices Drop

Building block chemical dips for fourth straight month

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Jul 27, 2010, 09:15 ET

HOUSTON, July 27 /PRNewswire/ -- U.S. ethylene prices fell in July, with the August New York Mercantile Exchange's (NYMEX) cleared ethylene settling and expiring at $0.3225 per pound. The contract, which began trading in July 2009, settled for July last month at $0.34 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, August ethylene was trading in the $0.33 per pound range at the end of June, down to $0.2925 per pound by July 14 before rebounding up to $0.3275 per pound by July 23, 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 July, more than 200 million pounds of ethylene have traded in the spot market.

"The ethylene market was in line with energy market trends during July, after spending several months defying it," said Kathy Hall, executive editor of PCW. "With a calm start to hurricane season, supply disruptions have been minimal, and raw material costs have also been steady. While most of the ethylene activity we have seen is for July and August, the markets are actively discussed out as far as 2011, with increased interest from many industries to manage price risk as it relates to finished goods markets."

Ethylene can be produced using raw materials that are derived from both crude oil and natural gas, such as ethane. Although ethylene has been far more volatile than ethane during the second quarter, ethane prices in July have also been relatively flat, trading between 44 cents and 47 cents per gallon.

Maximum steam cracker operating rates in the U.S. Gulf was about 93% during July. Maximum operating rates were at 91.1% for steam crackers in Texas and 100% in Louisiana, a combined rate for the region of 93.3%. By comparison, maximum steam cracker operating rates a year ago were around 75%, and spot ethylene was trading at $0.20 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.

www.petrochemwire.com.

SOURCE PetroChem Wire