US spot ethylene settled at a 12-week high Thursday to be assessed at 56.5-57 cents/lb FD USG, up 3 cents/lb week on week, as a delay in the startup of a major transmission line between Texas and Louisiana, tightening supply amid a busy turnaround season and a suspected unplanned production outage pushed spot markets to levels not seen since late January.
Thursday's assessment was the highest since January 30, when it stood at 56.75-57.25 cents/lb FD USG, Platts data showed.
Chevron Petrochemical Pipeline's Evangeline transmission system, the largest of three lines supplying facilities in Louisiana with ethylene from Texas-based producers, has had its restart pushed back to mid-May from early May from a shutdown that began in August 2013, sources said.
"You must have ownership of the ethylene at Mont Belvieu [Texas-based storage and trading hub] in April in order to move it across to Louisiana in May," one trading source said. "That is one of the reasons for the spike seen recently in spot prices," the source added.
Spot ethylene prices hit a 15-month low October 8, 2013, at 43.25 cents/lb FD USG, after the line went down, pressured by the resulting glut of product in the Mont Belvieu, Texas, trading hub. Deals via the Choctaw pipeline in Louisiana in October were concluded at a hefty premium of 64 cents/lb and 66 cents/lb in mid-October and late-October, respectively. One trading source estimated transfer costs between the two states' pipeline systems at 2 cents/lb, and estimated the daily transfer rates at between 1 million and 3 million lb/day.
In spot markets Thursday, April was heard traded at 56.50 cents/lb and 57 cents/lb MtB Williams pipeline basis, while May was heard traded at 57 cents/lb MtB Wms and 57.25 cents/lb MtB-other pipeline basis. The last Choctaw deal was heard traded Wednesday at 67 cents/lb.
In addition, possible production disruptions Wednesday at Dow Chemical's petrochemical complex in Freeport, Texas, were heard pushing spot markets higher, multiple market sources said, as Dow's olefins production in Freeport includes two steam crackers with an estimated 1.68 million mt/year of ethylene, according to Platts data.
The purported production issues come amid two planned turnarounds in Texas by olefins producers ExxonMobil Chemical and LyondellBasell that began in late March, which are adding to the tight supply situation.
Neither Dow nor Chevron officials were available for comment on the operational issues.
