US ethylene contract pricing have hit 39-month lows after settling for April and May down 1.5 cents/lb and 0.75 cent/lb, respectively, market sources said Tuesday.
The two-month settlement late Monday, which sources said was considered marketwide despite at least one party not agreeing to the levels, put the April settlement at 26.75 cents/lb ($589.73/mt) and May at 26 cents/lb.
The May price was the lowest since February 2015 when it settled at 25.75 cents/lb, according to S&P Global Platts data.
The decreases came on the lower end of market expectations, which called for a drop of 1.5-2 cents/lb for April and 1 cent/lb for May. March ethylene contracts settled at 28.25 cents/lb.
Market sources attributed the drops in contracts to weak spot pricing in an oversupplied market.
Spot prices hit record lows of 12 cents/lb on May 10 amid a glut in the US Gulf Coast region. Spot pricing has rebounded since, with ethylene for prompt-month delivery last assessed Monday at 15.625 cents/lb, up 3.625 cents from the low, or 30.2%.
New capacity additions along the US Gulf Coast lent to the growing supply length. More than 3.5 million mt/year of new capacity has been added in the last 12 months alone, most of which has been heard running at healthy rates. Another 4 million mt/year of new ethylene capacity is slated to come online this year, with more expansions set for 2019 and beyond.
Spot front-month ethylene assessments averaged 14.446 cents/lb in April, down 4.179 cents from March and in May averaged 13.665 cents/lb, down 0.781 cents/lb from April.
In feedstocks, front-month purity ethane assessments in April averaged 27.649 cents/gal ($205.16/mt) non-LST Mt. Belvieu basis, up 2.524 cents from March. Front-month ethane assessments for May averaged 26.216 cents/gal, down 1.433 cents from May. Ethane pricing reached a four-year high Friday and has continued to inch upwards on a pipeline closure in the US East Coast.
Market sources said they expect to see June contracts rise on the back of rebounding spot ethane and ethylene pricing as well as strong demand from the downstream polyethylene sector.
