U.S. prices for ethylene, the building block chemical for products ranging from plastic packaging to antifreeze, recently reached levels not seen since the 2005 hurricane season, according to PetroChem Wire, a daily newsletter serving the petrochemical industry.
Ethylene touched 75.125 cents per pound on April 4, the highest level in at least seven years, PetroChem Wire reported. Prices began 2012 at 56.75 cents per pound. Ethylene climbed as unplanned plant outages and scheduled maintenance caused supply to fall short of demand.
"Spot ethylene prices are currently a function of supply-demand economics and are not influenced by their raw material costs," said Kathy Hall, PetroChem Wire's executive editor. "Ethylene is also a fundamentally smaller supply pool than, say, oil or refined products. While there are hundreds of refineries in the U.S., there are only around 40 ethylene plants," Hall said. "So during a period where several plants are in planned maintenance turnarounds, it represents a higher percentage of production than it does when there are several refinery turnarounds occurring."
PetroChem Wire's ethylene price is used to settle daily contracts for the chemical traded on the New York Mercantile Exchange. The contract for May delivery slipped from the peak, and expired April 27 at 65.5 cents per pound. Prices have increased 15 percent so far this year.
"Spot ethylene prices have backed off a little in April as various plants have come back online from their maintenance outages. But they're not all back yet -- and the precarious state of supply has created a bit of support for current pricing and prevented a free-fall in April," Hall said. "We still have some major ethylene plants that will be in turnaround until June."
Ethylene can be produced using raw materials that are derived from both crude oil and natural gas, such as ethane.