US Ethylene Contracts Were Heard Settling 4 Cents Below February's Level to 45.5 Cents/Lb

US March ethylene contract negotiations are still ongoing as US PVC producers are holding out for larger decreases, market sources said Tuesday.

"A number of buyers have settled at a 4-cent/lb decrease, however there are at least two PVC producers that are requesting 4.25-4.5 cents/lb decreases," one trading source said. "The number is still not accepted market-wide and could turn this into a two-month settlement," the trading source added.

US PVC production accounts for 20% ethylene consumption, according to sources, and unlike polyethylene, production is not vertically integrated with ethylene production.

On Wednesday, US ethylene contracts for March were heard settling 4 cents below February's level to 45.5 cents/lb, according to sources, which also was to push the posted price 4 cents lower at 50 cents/lb.

Although uncommon, a similar negotiation pattern occurred in mid-2013, when buyers held out for a three-month settlement for April, May and June, which dropped contract prices by 0.75 cent/lb, 1 cent/lb and 0.75 cent/lb, respectively.

Sources cited substantial drops in feedstock prices as well as steady spot markets in prior months, despite planned turnarounds at two big Texas producers, as reasons for the buyers' demand for a larger decrease.

US purity ethane, the main feedstock for ethylene production, averaged 30.17 cents/gal, down 8.12 cents/gal, while Non-LST Mont Belvieu propane prices averaged $1.063/gal in March, down 37.56 cents from February's $1.4386/gal, according to Platts data.

US spot ethylene assessments averaged 51.95 cents/lb in March, up 0.04 cent/lb from February's 51.91 cents/lb average, according to Platts data.

US ethylene contract prices are settled between major producers and buyers at the beginning of the month for the previous month.

The settlements take into consideration changes in spot ethylene and spot feedstock pricing.

In markets Tuesday, spot ethylene was heard bid at 51.25 cents/lb Mont Belvieu Williams pipeline basis, offered at 53 cents/lb MtB Wms and traded twice at 52 cents/lb MtB Wms for April deliveries. May was heard bid at 51.75-52.25 cents/lb MtB Wms, offered at 52.375-53 cents/lb MtB Wms and traded at 52.375 cents/lb MtB Wms.