US ethylene costs drop as downed plants restart

US ethylene prices declined in early February from the eight-month peak reached in late January and then plateaued, signaling a potential improvement in profit margins for manufacturers heading into spring, according to a new report from pricing group PetroChem Wire.

US ethylene costs fell from nearly 68 cents/lb on January 28 to 61.75 cents/lb by February 12 before rebounding slightly to end the month at 62.75 cents/lb, a 7% overall decline.

At the same time, costs to produce ethylene from ethane rose from 7.5 cents/lb to 8.5 cents/lb, and propane-based costs rose from 2 cents/lb to 4.5 cents/lb, according to the report.

Ethylene price stability in recent weeks following the earlier, more dramatic price movements, suggests a more balanced supply/demand picture for the chemical.

"Overall, February was a stable month for ethylene and many of its downstream markets," said Kathy Hall, PetroChem Wire's executive editor. "During January, some unexpected plant outages contributed to prices rising. Once those plants came back online, prices stabilized."

The 68-cent ethylene price seen in late January was the highest level since early May 2012 and was the pinnacle of an uninterrupted price increase that began in early December.

Ethylene prices jumped by nearly 30%, or 18 cents/lb between early December and late January.

This steady price increase reflected strong domestic and export demand and tighter domestic supply for polyethylene, ethylene's largest plastic derivative. The US and Canada recorded their highest volume of polyethylene exports in three years in December.

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