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Sasol delays Lake Charles LDPE startup to October

July 23, 2020

Sasol now expects to achieve beneficial operations at its 420,000 mt/yr low density polyethylene (LDPE) plant in Lake Charles, LA before the end of October 2020.

The unit was damaged during a fire in January.

“Some challenges were experienced in the completion of the restoration process, resulting in a slight delay to the previous market guidance of a [beneficial operations] date before September 2020,” the company said in a statement.

The company defines beneficial operations as 72 consecutive hours of on-spec production.

The North American LDPE market has been tight in recent months, but two new producers, Sasol and Formosa, are working to bring on new capacity later this year. Formosa’s 400,000 mt/yr LDPE unit Point Comfort, TX is expected to start up in September or October.

Tight LDPE supply and strong demand from packaging applications has resulted in an unusually strong premium in the export market. So far in July, LDPE film has averaged a 9 cts/lb ($198/mt) premium to LLDPE butene film on a railcar FOB Houston basis, according to OPIS PetroChem Wire data. A year ago, that spread was only 2-3 cts/lb ($44-66/mt).

LDPE film for export has been at 40-41 cts/lb railcar FOB Houston this week, up from recent lows of 35 cts/lb in early May.

In the domestic secondary market, resale pricing for generic prime LDPE clarity film (5-6% haze) was at 54-56 cts/lb railcar delivered.

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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US Ethylene, PE Prices See Strong Start to July, Buoyed by Exports

July 7, 2020

Despite facing a general headwind of unsteady demand from many manufacturing market sectors, US ethylene prices are up nearly 20% at the start of July. 

Ethylene at the NOVA hub at Mont Belvieu staged a mild rebound in the second half of the month, rising from a low of 11.75 cts/lb (a 34.9 cts/gal equivalent) to 13.625 cts/lb (40.5 cts/gal) by June 30. In the first few trading days of July, however, the rebound has looked like more of a rally, with the front month hitting 16 cts/lb (47.7 cts/gal) on July 2, a gain of 17.5%. MtB-NOVA ethylene continued to hold steady at that level, trading another six times at 16 cts/lb so far this month. At the Enterprise hub at Mont Belvieu, pricing increased from 14.5 cts/lb (43.1 cts/gal) for June-delivery ethylene on June 30 to 15.5 cts/lb (46 cts/gal) for July pounds on the first of the month and then to 16.5 cts/lb (49 cts/gal) this morning. Prompt ethylene trading activity was brisk with a total of 43 million pounds trading in Texas during the first four trading days of July.

US Gulf Coast maximum operating cracker rates are estimated to be near 88% so far this month compared to 91% in June. The July rates include known downtime at the BASF Total Petrochemicals (BTP) cracker in Port Arthur, TX, Eastman’s HCC-3 olefins unit in Longview, TX, Formosa’s OL-1 olefins unit at its facility in Point Comfort, TX, the Olefins Unit 1 at the Ineos Chocolate Bayou, TX facility, and the Dow TX-9 olefins unit in Freeport, TX. Other companies have confirmed in quarterly earning calls that they have reduced rates at all of their chemical plants. 

While demand forecasts have been cautious during the COVID-19 pandemic, US polyethylene producers saw relatively strong sales in the domestic market in June, although some of this was attributed to customers building inventory in advance of anticipated price hikes. Current pricing for high-density blow mold grade polyethylene was 33 cts/lb FOB Houston. Prices for wide-spec polyethylene, which is considered a leading indicator for the broader market, have risen by 3-7 cents/lb from lows seen in late April and early May. 

Exports have played a key part of the overall price strength for both ethylene and polyethylene. 

Enterprise's ethylene export terminal that opened at the end of 2019 has steadily shipped more cargoes each month. In 1Q 2020, cargoes from Houston were going to both Europe and Asia, but the arb to Europe has closed and all cargoes in 2Q went to Asia. Roughly 25,000 mt left Houston in April and another 25,000 mt left in May. In June, volumes jumped to 100,000 mt spread over nine cargoes. So far in July, shipbroker reports indicate that eight cargoes have been scheduled to leave the Houston Ship Channel during July totaling approximately 75,000 mt. 

Polyethylene export volumes have continued to rise year-over-year. PE export shipments in May totaled 954,058 mt, up 21% from a year earlier. April and March polyethylene shipments were up 11% and 24% year-over-year, respectively. Demand from China was an important driver of US PE exports in the second quarter. China emerged as the top export destination in May, accounting for 167,435 mt of US PE exports, and traders estimated this volume could exceed 300,000 mt in June when statistics are released.

 

--Reporting by Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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BP exits petrochemical manufacturing, sells assets to Ineos

June 29, 2020

BP, once a global powerhouse in petrochemical manufacturing, is completely exiting the space and selling its remaining chemical plants to Ineos. The $5 billion deal includes BP's global aromatics, acetyls plants and related businesses. Ineos Olefins & Polyolefins was created in 2005 when it acquired BP assets that were operating under the subsidiary name Innovene. Ineos currently operates petrochemical assets at 180 sites in 26 countries, according to BP's statement today. 

The transaction, which is expected to close before the end of this year, involves Ineos paying BP a deposit of $400 million and payment of a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three installments during the first half of 2021. The deal is closing about one year ahead of BP's target to divest $15 billion of assets and "reinvent BP" according to the statement. 

"I recognise this decision will come as a surprise and we will do our best to minimise uncertainty," BP CEO Bernard Looney noted in the company's press statement. 

The sale includes all of BP's aromatics and acetyls businesses, including a PTA plant at Cooper River, SC, xylenes and acetic acid manufacturing at Texas City, TX and its 36.9% stake in assets operated by Atlas Methanol at Point Lisas in Trinidad & Tobago. "In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the US," according to the BP statement. "Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses."

 

--Reporting by Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Braskem prepares to start up US polypropylene plant, ramp up exports

June 24, 2020

Braskem announced that it has completed construction of its Delta polypropylene (PP) plant in La Porte, TX, and has begun the commissioning process.

“Initial production test runs are anticipated to begin in the next month with the first full scale commercial production activity currently expected in the third quarter of 2020,” the company said in a statement on its website.

The Unipol-process PP plant, with a capacity of more than 450,000 mt/yr or 1 billion pounds/yr, will have the capability to produce a range of HoPP and CoPP resins. It will be the largest single unit in the world, and the first new PP plant built in the US since 2003, according to Braskem.

The company also said its Port of Charleston, SC, export center is scheduled to open in 3Q 2020, providing packaging and storage services to export 204,000 mt/yr PP from its US plants.

The combination of improved demand, planned outages in the third quarter and export opportunities will support a smooth ramp-up of the new facility, according to the company’s vice president of North American PP, Alexandre Elias.

Another US PP manufacturer,  Formosa Plastics Corporation USA, has notified customers in recent weeks that it is planning a significant PP plant turnaround at Point Comfort, TX, during August and September.

US PP export prices have made substantial gains over the past two months. Benchmark HoPP grades for raffia and injection molding applications were priced in the high 20s cpp and low 30s cpp railcar FOB Houston as recently as 1H May.

June HoPP raffia export pricing is at 35 cpp railcar FOB Houston, up 4-6 cpp from the reported lows, according to OPIS PetroChem Wire.

Domestic PP spot prices have been steady since May, reflecting the flat trend for monomer prices. Spot generic prime HoPP resale pricing has been range-bound at 39-42 cpp on a rail delivered basis since the beginning of May.

However, domestic brokers have indicated they are slightly bullish, with domestic demand showing a gradual recovery from the coronavirus disease 2019 (COVID-19) lockdowns of March-May and global propylene/PP values supported by the recent uptick in crude oil prices.

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Rising polyethylene secondary market points to momentum shift

May 26, 2020

US domestic spot resale prices for polyethylene (PE) have moved up by 1-2 cts/lb in 2H May amid reports of stronger-than-expected demand and tighter spot availability.

The secondary market for wide spec and generic prime PE is commonly viewed as a leading indicator for the broader prime market.

pcw 0527Last week, brokers were taking orders for offgrade high density polyethylene (HDPE) frac melt at 29-30 cts/lb railcar delivered, up from 27-28 cts/lb earlier in the month, according to OPIS PetroChem Wire.

Good quality offgrade LLDPE butene film was reselling at around 30 cts/lb railcar delivered, compared with 28-29 cts/lb earlier in the month.

Generic prime spot resale prices for LLDPE butene film were steady at 33-35 cts/lb railcar delivered, but availability of resin at May prices was drying up. Resellers expected offers to move higher, based on producers’ announcements to raise prime market pricing by 4 cts/lb in June.

Generic prime HDPE BM HIC spot availability was reported to be sold out for May. Resale pricing for HDPE BM HIC was last seen at 34-36 cts/lb railcar delivered.

The spread between the prices for offgrade/wide spec resin and generic prime resin is narrower than usual, hinting at upward pressure on generic prime prices.

Resellers reported more inquiries from customers in the past week. Some of the uptick in activity was related to downstream manufacturing plants reopening or running at higher rates, although the manufacturing reopening was described as gradual and not wholesale.

Resellers also attributed the rise in PE buying interest to a shift in sentiment that prices are unlikely to move lower from here, prompting end users to replenish their resin inventories.

The increase in domestic buying interest has been accompanied by a reduction in PE spot offers from suppliers. Traders saw indications that some suppliers have been quietly dialing back operating rates, in addition to the much-publicized operating rate cuts announced last month by Dow Chemical and LyondellBasell.

One resin broker predicted that many orders will get pushed into June delivery slots, because there is not enough availability to fill all the orders for May.

The operating cuts were said to be motivated by rising upstream ethane costs, which made PE producers margins unsustainable, as well as a desire to avoid building inventory amid the uncertain demand environment of the coronavirus disease 2019 (COVID-19) pandemic.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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China market offers near-term support for US PE export pricing

May 6, 2020

US PE spot prices for export have firmed in early May amid reports of stronger demand from China in recent weeks.

Large volume (>10 railcar) LLDPE and HDPE transactions were reported in late April as low as 22.5-23 cts/lb, according to OPIS PetroChem Wire, but producers were not seen as eager to repeat those deals in early May. HDPE blow molding grade closing Monday at 24 cts/lb for railcars staged at Houston-area warehouses. Some suppliers have backed out of the market temporarily after booking large volumes for export in April.

Other suppliers still had incremental resin available for export but were holding firm on export offers at 24 cts/lb for LLDPE butene film and 25 cts/lb for HDPE blow mold.
Traders cited several reasons for the shift in tone at the start of May. Producers were still sizing up their domestic sales before committing to May cargoes, with optimism that loosening containment measures against coronavirus disease 2019 (COVID-19) would result in stronger consumer spending and PE consumption.

On the supply front, several PE producers have stated publicly that they are reducing 2Q operating rates and even idling select plants because of slower demand and less favorable production economics in North America relative to other regions.

And overseas, the gradual reopening of China’s economy has been accompanied by a surge in demand for PE imports, including US-origin PE, for which the Chinese government began allowing exemptions from trade war tariff barriers in early March.
There were estimates that more than 100,000 mt of US PE was booked for export to China over a one-week period in April. By comparison, PE shipments to China during all of March amounted to just 29,000 mt.

PE prices in China have been boosted in recent weeks by the resumption of manufacturing activity as well as speculative activity in the futures market, which tends to react more quickly than the physical PE market to changes in crude oil pricing and general sentiment.
Trading activity paused in China late last week and early this week for a national holiday, but futures markets reopened Wednesday with a 4.3% gain on the active LLDPE contract.
Higher futures prices incentivize PE import buying as players work to cover speculative positions.

US cargoes were sold last week at $680/mt (30.8 cts/lb) CFR CMP for LLDPE film and HDPE injection grades, $690-700/mt (31.3-31.8 cts/lb) CFR CMP for HDPE blow molding, and $700-710/mt (31.8-32.2 cts/lb) CFR CMP for HDPE film.

The China trade has established a price floor for other regions and relieved inventory pressure for US producers, but traders were uncertain how long it will last.

With the abundance of US PE now on the water or getting ready to ship in May or early June, China will receive an influx of US PE around mid-year. If demand for finished goods does not recover as quickly as expected, Chinese converters could be stuck with high resin inventories later this summer.

Shipping companies are also planning to hike freight rates in June, which would squeeze margins and pressure pricing on exports to China.

Some traders were also concerned about a nightmare scenario in which China reestablishes steep retaliatory tariffs on US PE and other chemicals, forcing a scramble to re-direct cargoes en route.

For now, at least, China has proven to be a resilient customer for US PE at a time when all other regions are struggling with the economic impacts of COVID-19.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Dow to idle 10% of PE/elastomers capacity for a month

April 30, 2020

Dow announced today that it will idle three polyethylene (PE) and two elastomers units for at least one month to match demand trends in the US, Europe and Latin America.

The units, located in Argentina and the US Gulf Coast, amount to 2 billion lbs/yr of capacity and represent about 10% of Dow’s global PE and elastomers capacity, company officials said during Dow’s 1Q earnings call.

Dow officials said they did not expect to lose any plastics market share because of the move, saying the decision would prevent a buildup of resin inventory amid weaker demand from industrial shipping and automotive segments.

“We’re not closing high cost assets, we’re closing to balance demand,” said Dow CEO Jim Fitterling.
Meanwhile, the company said it has not idled any of its upstream crackers, noting that about 9-10% of the US Gulf Coast industry’s capacity is offline currently.

Dow’s TX-9 cracker is back up from a recent planned outage and running at an expanded rate of 2 million mt/yr. Most of the additional 500,000 mt/yr capacity was intended for MEGlobal.

Fitterling said that Dow’s US Gulf crackers consumed approximately 75% ethane and the remainder propane and butane in 2019. While naphtha prices have come down, he said ethane was still the best crack because the co-products of naphtha cracking, especially butadiene, have seen significant demand destruction due to the halt in automotive manufacturing.

“There’s no place for the C4s to go,” Fitterling said.

 

--Reporting by David Barry, David@petrochemwire;

--Editing by Joe Link, Joe@petrochemwire.com

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US Olefins Markets Shrug Off WTI Plunge; Aromatics Take a Hit

April 21, 2020

The freefall seen in prompt WTI futures on Monday was ignored by US olefins markets, but benzene and toluene were not immune as those prices sank.

Spot market April ethylene, which is barely profitable based on any NGL, traded slightly higher late Monday, moving from 8.5 cts/lb (25.2 cts/gal equivalent) to 8.875 cts/lb (26.4 cts/gal equivalent) basis FOB Mont Belvieu-NOVA. Ethane, the cheapest feedstock currently, was up 10-11% on the day, with April trading in a range of  11.75-15 cts/gal FOB Mont Belvieu. April ethane was extending gains Tuesday morning, reaching 17 cts/gal early in the day. In general, ethylene tracks more to natural gas than to crude oil; May nat gas futures were up 17 cents on Monday, settling at $1.924/mmBtu.

Spot polymer grade propylene (PGP) traded up from 24.25 cts/lb (105.5 cts/gal equivalent) to 25 cts/lb (108.75 cts/gal) basis FOB Mont Belvieu-Enterprise. While this finished grade of propylene can track propane, which was down 2-3% yesterday, its other major feedstock is refinery grade propylene (RGP), which has become less and less available amid widespread refinery slowdowns across the US. RGP is being bid into a void, with no transactions seen at all so far in April, but bids have risen from 9.5 cts/lb (41.3 cts/gal) at the start of the month to 15.5 cts/lb (67.4 cts/gal) on Monday, a gain of 66%.

Ethylene and propylene have seen better demand than most refined product markets, owing to the surging worldwide need for masks, face shields, gloves, medical supplies and flexible packaging for consumer goods and food. 

Benzene and toluene are another story, however. Benzene's major downstream market, styrene (and polystyrene) is not in high demand and toluene's use in gasoline has also created a stagnant buyers' pool. Benzene tracks crude closer than most chemicals, while toluene tends to follow gasoline price trends. April benzene dropped from 109 cts/gal down to 95.75 cts/gal basis DDP Houston/Texas City. April toluene fell from 100 cts/gal to 94.25 cts/gal. 

Olefins and aromatics forward markets, like crude and RBOB, were firmly in contango. June and July pricing was 9 cts/lb and 9.875 cts/lb for ethylene, 25.75 cts/lb and 26.125 cts/lb for PGP, 102 cts/gal and 104 cts/gal for benzene and 100.75 cts/gal and 106 cts/gal for toluene.

While June WTI futures remain in positive territory, benzene market participants are concerned that crude will eventually weigh down June and July pricing as well, which helped to freeze market players on Monday as they wait to see where crude heads next. As crude has fallen again on Tuesday morning, benzene appears poised to see another 5-10 cts/gal declines today. As for toluene, potential buyers in Asia are kicking the tires on availability out of the US Gulf Coast. However, the arbitrage level to send to Asia is under 85 cts/gal. The reformate market is currently below 85 cts/gal and toluene could head towards that level this week, but that also assumes that Asia pricing will hold overnight despite the weak energy markets. Toluene's disproportionation (TDP) netback value to produce xylenes is near 90 cts/gal, but with paraxylene values also weak there is little incentive to run the units harder at the moment.

 

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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North American Polyolefins Demand Surges in Troubled March

April 13, 2020

U.S. and Canadian producers' polyethylene (PE) sales were at a record high of 4.687 billion lbs. (2.126 million mt) in March, according to preliminary data released by the American Chemistry Council (ACC).

The figures verify anecdotal evidence of strong plastics demand in March, as consumers rushed to stock up on food and supplies -- much of it packaged in plastic film or containers -- in preparation for sheltering at home from the coronavirus disease 2019 (COVID-19).

One film manufacturer described their March demand as "outstanding," and some plastic processors reported a continuation of that strength in April.

However, some PE producers were sounding notes of caution about second-quarter demand and were said to be trimming rates to balance output against lower demand forecasts.

Resin brokers last week noted that bulk trucking companies in the U.S. were calling for more business to keep their drivers employed amid a downturn in shipments. Bulk trucks are used to deliver plastic resins from rail terminals to plastic processing plants, and the slowdown in bulk trucking suggests a slowdown in business for smaller plastic processors, which rely more on bulk and box trucking for their resin supplies. Large-scale plastic processors, particularly the operations that produce huge quantities of plastic packaging film or bottles for consumer products manufacturers, tend to have bulk railcars of resin shipped directly to rail sidings adjacent to their plants.

The sentiment around PE exports has also been trending negative, with typical outlets such as Africa, Latin America and India hobbled by coronavirus containment measures. Traders have become increasingly concerned about the creditworthiness of their customers, and issues with payments and order cancellations are expected to increase in emerging markets, especially those like Brazil that have experienced currency devaluations of 20% or more since the start of 2020.

North American PE export sales totaled 1.854 billion lbs. (841,000 mt) in March, about 10% above the 12-month average. North American PE producers have become more dependent on export sales in recent years, with exports accounting for between 35% and 43% of total sales over the past 12 months.

China may have played a large role in strong export figures for March. Demand there has been boosted by rebounding manufacturing activity and a government initiative to waive trade war tariffs on U.S.-origin PE, which took effect early in the month.

However, the abundance of PE resin in the global market and the low cost of feedstocks has put PE export prices under pressure.

The Houston railcar market for high-density polyethylene blow molding grade was at 26-27cts/lb. FOB as of April 9, according to OPIS PetroChem Wire. That market averaged nearly 30cts/lb. in March and 32cts/lb. in February. Even at the latest prices, traders are hesitant to buy unless they have a firm purchase order for the new resin. Buyers in Asia and the Middle East are bidding at levels that would require a Houston railcar price of 23-24cts/lb., traders said last week.

The polypropylene (PP) industry followed PE's lead and posted strong sales for March, according to the preliminary ACC data.

North American PP sales totaled 1.430 billion lbs. (649,000 mt) in March, which was a seven-month high. PP industry operating rates were also at a seven-month high in March, resulting in the first substantial inventory build since last summer. The industry was plagued by low operating rates in the high 70s% and low 80s% from October 2019 to February 2020, partly due to weaker demand and partly due to plant maintenance and unplanned outages.

However, as with PE, the PP demand outlook may not be as rosy as March sales figures would suggest.

PP nonwoven fabrics are an important component in the COVID-19 response, used in protective gear and disinfecting wipes. Production of those materials is going to be at full throttle for the foreseeable future.

However, a large portion of PP goes into rigid durable goods such as car parts and plastic totes, and the molders of these goods are the companies slowing down the most in recent weeks.

Custom PP molders, which use other company's molds to produce batches of parts, are barely running compared with early March, noted one resin supplier.The Houston railcar market for PP homopolymer raffia or injection molding grades was at 35.5cts/lb. as of April 9, according to OPIS PetroChem Wire. That market averaged 41.3cts/lb. in March and 41.7cts/lb. in February.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

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US Aromatics Market Takes Another Hit; Olefins and Polymers Unfazed

March 24, 2020


“Can’t get much worse” was the talk of last week in the US aromatics markets -- and then things got much worse on Monday.

Refiners throughout the US were running into containment issues as their gasoline demand has disappeared in a matter of weeks. That pushed RBOB prices down to $0.41/gal. However, the containment concerns pushed down the front month contracts, and May is now showing a $0.07/gal contango.

Like gasoline, finding buyers is a challenge in the toluene market. There appears to be plenty of supply looking for a home and the normal backstop into gasoline is withering away. Gasoline blenders are bidding for toluene on a gasoline plus $0.30/gal basis. That is below reformate prices which are $0.35–0.40/gal over RBOB. In theory, the toluene disproportionation (TDP) netback is $0.90/gal but with demand falling so fast, blenders are hesitant to buy toluene at any level.

The spot benzene market fell $0.25/gal on Monday -- a 19% one-day drop -- despite crude prices largely holding steady. General malaise for energy and the expectation for crude to eventually fall as well didn’t do benzene sellers any favors. However, the main culprit for US benzene's price slide was Europe. EU, like North America, is in the process of closing down activity in their cities and demand is expected to fall quickly for everything not tied to packaging or medical supplies.

That left European traders in a state of panic as well, and an April cargo traded down to $300/mt ($1/gal). Offers then fell to nearly $270/mt (90.3 cts/gal) at the end of the European day. That dragged the US Gulf Coast price down to near the arbitrage level from Europe. With demand uncertain in this region and Marathon delaying its turnaround for at least a month, there appears to be little appetite to bring more EU material to the US.

The US Gulf market was thin for most of the day as buyers started under $1/gal. It took nearly the whole day for ranges to narrow and just before the close of business a few April deliveries traded at $1.05/gal. Benzene's slide has been dramatic -- it was $1.80/gal on Monday, March 16, and was $2.1075/gal on Monday, March 9. The last time that prices were near $1.00/gal was in January of 2009; benzene's all-time low was $0.70/gal in early December of 2008.

The spot mixed xylenes market held up somewhat better than toluene and gasoline, but that is grading on a curve. Downstream PET demand right now is quite high.  People fear that what happened at the Port of Houston (container arrivals being slowed or stopped) could also happen at East Coast and West Coast ports, which would limit availability of PET imports. As bottled water, sanitizer, and cleaning products have been flying off the shelves, producers of their PET containers and bottles are buying PET over contract maximums wherever possible and have ramped up production. Even so, mixed xylenes were offered lower today, slipping below $1/gal as supply will increase now that Citgo's Lake Charles production has restarted.

MX buyers' price ideas are sitting closer to its gasoline blend value, which is under $0.90/gal and opens a theoretical arbitrage to Asia. However, when China and Asia were dealing with lower demand six weeks ago, they sent their MX to the US Gulf Coast, and those cargoes are arriving now. Traders here could get ready to send product back to Asia if prices don’t fall substantially to close to arbitrage.

It's unclear if the US olefins markets have found their market floors, but spot prices barely moved on Monday. Spot polymer grade propylene (PGP) traded down from 19.875 cts/lb (86.45 cts/gal equivalent) to 19.5 cts/lb (84.82 cts/gal), despite the slide seen in propane. Spot ethylene was unchanged, albeit at its all-time low, at 10 cts/lb 29.7 cts/gal equivalent, perhaps a nod to the small gains seen on Monday in ethane.

As with PET, downstream polymer markets are where the slumps stop. Supporting numerous consumer products and medical applications, domestic demand for many grades of polyethylene and polypropylene was robust. Polypropylene, however, has a significant vulnerability from its automotive uses. Spot polyethylene prices were unmoved Monday at 30 cts/gal (89.1 cts/gal) FOB Houston for high-density grade blow-molding and at 29 cts/lb (86.1 cts/gal) for linear low-density grade. Spot homopolymer injection grade polypropylene was 41 cts/lb (178.3 cts/gal) FOB Houston.

--Reporting by Kevin Wallman, kevin.wallman@ihsmarkit.com, Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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Shell Stops Construction of Pennsylvania Chemical Complex 

March 19, 2020

Citing a commitment to the health of its workers and to contain the spread of the COVID-19 virus, Shell has suspended construction of its world-scale chemical complex in Beaver County, Pennsylvania.  

"We have made the decision to temporarily suspend construction activities at Shell’s Beaver County site, effective March 18th," according to a statement from Hillary Mercer, VP Shell Pennsylvania Chemicals. "In the days ahead we will install additional mitigation measures aligned with CDC guidance. Once complete, we will consider a phased ramp-up that allows for the continuation of safe, responsible construction activities."

Shell announced the final investment decision on the project in June 2016 and construction began in November 2017 at the site on the banks of the Ohio River in Potter Township, near Pittsburgh. The complex includes an ethane steam cracker that will provide ethylene feedstock to three polyethylene units with a combined resin output of 3.5 billion lbs/yr.

The decision comes at a time of historic lows for energy, NGL and olefins prices in the US. Spot ethylene at Mont Belvieu reached a new low of 10 cts/lb this morning; spot propylene was 20.5 cts/lb for polymer grade and 9.5 cts/lb for refinery grade. Spot polyethylene prices have been more resilient, owing to sustained demand from packaging and medical sectors. Spot high-density PE and linear low-density PE were both 30 cts/lb on a bulk railcar basis FOB Houston. 

 

--Reporting by Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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Ethylene, Propylene Contango Doesn’t Always Sync With NGL Curve Shapes

March 19, 2020

As spot ethylene prices continued hitting new lows, the shape of ethylene's forward curve flipped into solid contango reflecting the weakness. Ethane and propane, however, still showed some backwardation in near-term months, creating higher margins for ethylene in the 2Q market than at any other time of the year. Contango is when the nearer-term month is below an outer month(s); backwardation is when the near-term month is above the outer month(s).

Mont Belvieu-NOVA ethylene ended the day on Friday, March 6, with the remainder of 1H 2020 in backwardation and the balance of the year in contango. As front-month prices cratered this week, however, ethylene's forward month curves slowly started to change shape when the 1H curve flattened and then moved into contango. Forward activity throughout the balance of calendar 2020 woke up on Monday, March 16, and continued for the ensuing days, resulting in 2H 2020 contango narrowing comparatively to the spreads on March 6. As of this morning, March Mont Belvieu-NOVA ethylene prices stood at an all-time low of 10 cts/lb (29.7 cts/gal equivalent).

In the Louisiana ethylene market, March Choctaw ethylene reached its all-time low this morning at 9.25 cts/lb. The Choctaw ethylene curve has been otherwise quiet throughout the recent market turmoil. The front month has decreased on a regular basis starting Monday, March 9, while the curve has remained flat. Wednesday, March 18, experienced the first and only change in shape when 0.125 ct/lb contango was added to the June/July spread in response to a March/3Q offer.

Polymer grade propylene (PGP) forward markets have been more active than normal. March has continuously declined over the course of the last two weeks while the out months have moved into wider contango. Most of the structure changes have been focused around paper strip trades for 2Q 2020, 4Q 2020 and 1Q 2021. Midday prices today showed March Mont Belvieu-EPC PGP at 20.5 cts/lb.

Forward markets for ethane and propane NGLs were in slightly backwardation in near-term months and flipped into contango further out in 2020. Purity ethane (Mont Belvieu TET) in 2Q was nearly 1 ct/gal below March pricing, according to OPIS' NGLs Forwards Report on Wednesday, while 3Q ethane was 2.5 cts/gal above March and 4Q was 4.8 cts/gal above March. The OPIS Global LPG Ticker showed March ethane at 9.875 cts/gal and April 0.125 ct/gal backward to March.

In propane (Mont Belvieu TET), the March/April spread was 0.625 ct/gal backward on Wednesday and the shape moved into contango for April/May, putting 2Q 0.625 ct/gal above March. Steeper contango in 2H 2020 brought 3Q propane 5 cts/gal above March and 4Q propane 9.7 cts/gal above March. The March/April backwardation in propane widened today, with March at 30 cts/gal and April at 26 cts/gal.

Butane's (Mont Belvieu TET) curve was contango throughout 2020, with 2Q prices 3.1 cts above March, 3Q 7.5 cts/gal above March and 4Q butane 11.4 cts/gal above March. Butane's contango was intact today, with March at 26.25 cts/gal and April at 29 cts/gal.

Natural gasoline (Mont Belvieu TET) showed the most pronounced contango in the NGLs complex, with the March/April spread at 4 cts/gal contango, 2Q at 4.5 cts/gal above March, 3Q at 10.8 cts/gal above March and 4Q at 15.2 cts/gal above March. Natural gasoline was also still in full contango today, with indicators for March 0.5 cts/gal below April.

As a result, costs to produce ethylene using ethane were 6.6 cts/lb for March, 5.9 cts/lb in April and 5.7 cts/lb in May.

Costs using propane were 7.1 cts/lb for March, 5.8 cts/lb in April and 6 cts/lb in May.

Costs using butane were 8.5 cts/lb for March, 8.7 cts/lb in April and 8.6 cts/lb in May.

Costs using natural gasoline were 4.9 cts/lb for March, 3.3 cts/lb in April and 3.5 cts/lb in May.

 

--Reporting by Julia Giordano, julia@petrochemwire.com and Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

 

US Benzene Slumps 22% Amid Pandemic; Styrene and Polystyrene Losses Muted

March 18, 2020

U.S. benzene prices have slumped 22% since coronavirus disease 2019 (COVID-19) was declared a pandemic on March 11, reaching $1.70/gal on Tuesday for prompt delivery, a 50ct slide. Prices have been tracking trends in Europe, which traded down to $460/mt ($1.53/gal equivalent). While benzene supply could be limited if refineries begin cutting operating rates, March benzene shorts are finding an ease to covering, even late in the month. U.S. benzene is expected to be well supplied into April with European Union and Asia import arrivals scheduled amid a weak downstream styrene market.

However, a worsening situation led to continued selling pressure in Europe on Wednesday with benzene prices bottoming out at $335/mt, equivalent to $1.10/gal. That keeps an open arbitrage for benzene from Europe to move to the U.S. Gulf Coast with a landed price near $1.30/gal. The buyers in the Gulf have been hesitant to emerge on Wednesday morning and offers were down to as low as $1.48/gal for May arrivals by lunchtime. The styrene spot price is at a bid level of $455/mt prompt March, $475/mt April and $495/mt May at the moment.

That is down from $500-$550/mt for March and $500-$560/mt for April and May an hour earlier this morning.

Styrene losses have been milder than most markets, as it was a weak market before the pandemic. March spot styrene began the month at 32-33cts/lb., and rested at 29-30cts/lb. this week. Multiple styrene production lines are expected to be down until early April, as well and a cumene line. Cumene is another use for benzene.

An upside for benzene could be if refiners begin to cut CDU and FCC operations that will eventually lead to lower reformer rates. There are also still a few reformer outages for maintenance in March that companies are trying to wrap up by April. The current benzene price is over a 2.6 ratio to crude, which is generally considered to be an indicator of a tight market.

Downstream polystyrene prices have eased, but not to a dramatic degree. This has been the case with U.S. plastic markets in general, as the effects of the upstream routs have not reached the manufacturing level so far. General purpose polystyrene prices have slipped from 68cts/lb. in early March to 66cts/lb. this week, while high impact polystyrene prices have moved from 73cts/lb. to 71cts/lb. Polystyrene has a range of consumer applications, primarily in disposable goods such as food packaging trays and take-out containers. It is also used in the manufacture of appliances, consumer electronics and construction materials.

 

--Reporting by Kevin Wallman, kevin.wallman@ihsmarkit.com, David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com, Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


US Propylene Price Slide Continues; Polypropylene Reaction Is Slow

March 17, 2020

 Refinery grade propylene (RGP) has seen a steep drop over the past week and a half in response to the current market turmoil.

Last week, March MtB-EPC pipeline refinery grade propylene (RGP) showed no reaction to energy markets or the COVID-19 situation on Monday until a trade was reported late in the day at 15cts/lb (65.25cts/gal). This represented a 9.1% decrease at the start of the week. The RGP market traded lower again on both Tuesday and Wednesday at 14.5cts/lb (63.075cts/gal) – and even lower on Thursday at 12cts/lb (52.2cts/gal). March ended the week on Friday offered at 11.5cts/lb (50.025cts/gal), representing a 30.3% drop for the week.

Yesterday, RGP matched its historical low when it traded at 10cts/lb (43.5cts/gal), bringing the decline down to 39.4% or 6.5cts/lb (28.275cts/gal). Its previous low mark of this value was seen on December 1, 2008. 

RGP is a byproduct of an FCC. It is hard to imagine increased RGP production in that fluid catalytic cracker economics are so dismal. An FCC margin is calculated by comparing the cost of the vacuum gasoil feed (WTI plus a differential) to the value of the products produced (70% gasoline and 30% diesel).

After having fallen to negative numbers Monday, the margin improved to about $3.06/bbl on Tuesday (the price of vacuum gasoil fell precipitously) but consider last year at this time it was $13.55/bbl.

A new market has emerged for VGO however, as it can be blended into very low sulfur (0.5%S) bunker fuel, which is now the dominant grade of fuel for large, ocean-going ships worldwide.

On Monday, VLSFO into ships was assessed by the OPIS Global Marine Fuels report at $280/mt, the equivalent of $42.79/bbl. VGO by contrast was rated about $4/bbl over WTI, or 30.95/bbl. Add a margin of $3.06/bbl to the cost of VGO inputted to an FCC and you get a value of $34.01/bbl. So the refiner would make $42.79/bbl if the barrel ends up as bunkers.

All this means is that FCC inputs are going to be limited. It is hard to run an FCC at below roughly 85% of capacity, so the production of RGP (as a byproduct of cat cracking) is going to be limited, which could tighten RGP supply.

But for the time being, both raw and finished grades of propylene are seeing selloffs.

Spot polymer grade propylene (PGP) prices have fallen drastically. Last week, March MtB-EPC polymer grade propylene (PGP) ended the day on Monday with an implied value of 25.375cts/lb (110.4cts/gal). This represented a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. Higher bids emerged on Tuesday and Wednesday, showing some opportunity for upside.

Those two days closed at 26.5cts/lb (115.275cts/gal). Things took another turn on Thursday when March MtB-EPC PGP traded at 25cts/lb (108.75cts/gal) early in the day. The front month continued to get offered down throughout the day, until March MtB-EPC PGP traded at 23.5cts/lb (102.225cts/gal) minutes before close. By Friday evening, March MtB-EPC PGP closed with an implied value of 23.5cts/lb (102.225cts/gal) and traded slightly higher late in the day at 24cts/lb (104.4cts/gal).

If there were any hopes for an increase in pricing based on Friday’s trade, they were quickly erased when PGP traded at 22.5cts/lb (97.875cts/gal) yesterday. PGP is now down 21.7% from the start of the last week’s decline.

PGP hasn't seen prices near this low since it closed at 24cts/lb (104.4cts/gal) on January 21, 2009; however, PGP's recorded low closing price is 15 cts/lb (65.25 cts/gal) from December 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

The ultimate demand for PGP rests with the polypropylene market, where spot prices have been slow to react. A raft of polypropylene plant issues and maintenance in 1Q has kept supply tight, supporting prices. Wide spec PP prices, usually the most volatile indicator of supply and demand, have held firm or even increased in recent weeks.

Some high-demand types of wide spec material have been bid above where prime contract prices are projected to settle in March, another sign of the tight supply. Resale pricing for wide spec PP has ranged from 40-48 cts/lb for delivered railcars, depending on the quality and type of resin. Generic prime HoPP injection resale pricing currently stands at 47-49 cts/lb delivered.

Traders expect PP supply overall to remain snug for the next 2-3 weeks, and there is some caution that the market could flip rapidly from short to long. Formosa in Point Comfort, TX and Phillips 66 in Linden, NJ, are in the process of restarting or have just restarted units from outages that lasted at least a month. Other PP suppliers are working to catch up after operating issues earlier in 1Q. In addition to improving operating rates at existing PP plants, Braskem is expected to bring online a new world-scale PP reactor in La Porte, TX towards the end of 2Q.

--Reporting by Julia Giordano, julia@petrochemwire.com, David Barry, david@petrochemwire.com and Robert Sharp, robert@petrochemwire.com

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


US Olefins Prices End the Week at or Near Historical Lows

March 13, 2020

US petrochemical markets took a hit this week as a result of the falling energy markets. Some products managed to stabilize early on while others continued to fall as the weekend neared, with propylene seeing the most dramatic drop.

After starting the week off with a fast decline, ethylene markets in both Texas and Louisiana appeared to have leveled out. By market close on Monday (March 9), March MtB-NOVA ethylene was down 7.4% from the March 6 value, settling at 12.5cts/lb (an equivalent of 37.1cts/gal). MtB-NOVA ethylene was last seen closed at this level on June 10, 2019, shortly after it reached a recorded low of 11.75cts/lb (34.898cts/gal) June 3-4, 2019.

Though it took a sharp drop on Monday, March MtB-NOVA ethylene was quiet for the remainder of the week until it traded early Friday at parity to assessed value of 12.5cts/lb (an equivalent of 37.1cts/gal). March Choctaw ethylene was down 1.125cts/lb (3.3413cts/gal), or 8.6%, at 12cts/lb (35.6cts/gal) by end of day Monday. Choctaw markets were quiet throughout the week, until the March MtB-NOVA/Choctaw ethylene spread traded on Thursday at a 1ct/lb (2.97cts/gal) premium on MtB-NOVA. This lowered the March Choctaw implied value even further to 11.5cts/lb (34.2cts/gal) for a total downturn of 12.4% so far this week.

The previous low-water mark for Choctaw ethylene was last seen June 3-5, 2019, when the product closed at a level of 12.125cts/lb (36.011cts/gal). The low ethylene prices in June 2019 were the result of an increase in supply, a decrease in demand and decreasing upstream prices. With near-term pricing at an equivalent of $275-$280/mt FOB Mt Belvieu, the arb remained wide open for shipments to flow to any other global market.

Purity ethane is on track to end the week around 5% lower from last Friday's close, although this percentage is colored by the extremely low absolute price levels from which the product is currently staging its rallies and collapses. Nonetheless, ethane this week also exhibited the extreme volatility that has been the hallmark of the equity-energy complex this week, recording sharp swings.

At around 10 a.m. CDT Friday, the spot price for the Mont Belvieu purity grade ethane had traced a range of 13.25-13.625cts/gal for an implied end-of-day average of 13.4375cts/gal. This would represent a 4.87% drop from the OPIS-assessed end-of-day average of 14.125cts/gal on March 6. However, today's price action would consolidate a smart rebound of around a cent from the low of 12.5cts/gal that Mont Belvieu purity ethane had recorded on March 9, the first day of the week.

The OPIS-assessed end-of-day average price had swung to an intra-week high of 14.625cts/gal at close on Wednesday, March 11, a 17% jump in two sessions -- again, from a lowly base -- over the March 9 low.

pcw 0313

Spot propylene prices fell drastically this week. March MtB-EPC polymer grade propylene (PGP) closed the day Monday with an implied value of 25.375cts/lb (110.4cts/gal). This represented a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. Higher bids emerged on Tuesday and Wednesday, showing some opportunity for upside. Those two days closed at 26.5cts/lb (115.275cts/gal). Things took another turn on Thursday when March MtB-EPC PGP traded at 25cts/lb (108.75cts/gal) early in the day. The front month continued to get offered down throughout the day, until March MtB-EPC PGP traded at 23.5cts/lb (102.225cts/gal) minutes before close. By Thursday evening, March MtB-EPC PGP was down 18.3% for the week. PGP hasn't seen a price near this low since it closed at 24cts/lb (104.4cts/gal) on January 21, 2009; however, PGP's recorded low closing price is 15 cts/lb (65.25 cts/gal) from December 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

PLASTICS PRICES EASE, STABILIZE

Polyethylene spot prices have slipped by 1-2 cents/lb from late February, but the market was quiet as traders stayed on the sidelines and producers were not aggressively offering material. Further downward pressure was seen on polyethylene values, but some participants suggested it would take another week or two to establish new price levels. US suppliers appeared to have HDPE blow mold and injection grades available for export, while HMWPE film and LDPE film grades were less readily available. HDPE blow mold pricing was at 30cts/lb (89.1cts/gal) on an FOB bulk railcar basis in Houston; that market had been flat at 32cts/lb (95cts/gal) throughout February.

Container logistics were cited as a potential limiting factor for export business. Empty containers were lacking in the U.S. Gulf Coast region, mainly due to COVID-19's disruption of trans-Pacific shipments. Cargo arrivals to the US West Coast from Asia were on the uptick, but by some estimates it would take 45 days to relocate the newly emptied containers to the US Gulf Coast. Meanwhile, some empty containers were being relocated from the East Coast to Houston at a rate of $500 per container.

Polypropylene spot activity was limited by tight supply, but that dynamic was expected to shift fairly quickly with the conclusion of some major planned and unplanned outages in the second half of March. PP buyers were watching for downward price pressure from the propylene and further upstream markets. HoPP injection spot prices were down 1 cent from last week at 41cts/lb (178.4cts/gal) railcar FOB Houston.

The PVC market was not immune from the economic and societal upheaval this week that was caused by the COVID-19 coronavirus pandemic. Producers and converters alike were concerned about keeping their workforces healthy, but converters pointed out they did not have the option of having their manufacturing personnel work from home.

The economic fallout from the virus was a concern, as people who work for businesses that have slowed down or shut down will most likely delay purchasing a new house or paying for home remodeling, thus reducing domestic demand for PVC. News of industries, companies and schools shutting down for various lengths of time started out as a trickle early in the week but had become a torrent by the end of the day Thursday. Resin producers said how long the pandemic lasts will determine how much PVC demand could be reduced.

REFINERY-BASED CHEMS HIT HARD

Chemicals more directly tied to refining economics, refinery grade propylene and benzene, also saw new lows this week, although benzene's declines were not as dramatic as for RGP.

March MtB-EPC pipeline refinery grade propylene (RGP) showed no reaction on Monday until a trade was reported late in the day at 15cts/lb (65.25cts/gal). This represented a 9.1% decrease at the start of the week. The RGP market traded lower again on both Tuesday and Wednesday at 14.5cts/lb (63.075cts/gal) – and even lower on Thursday at 12cts/lb (52.2cts/gal), representing a 21.2% drop for the week. The last time MtB-EPC pipeline RGP traded at this low of a value was on December 11, 2008. Its historical low was seen a few days before that when it traded at 10cts/lb (43.5cts/gal) on December 1, 2008.

The spot benzene market held up slightly better than some of the energy markets. WTI crude prices were down by $1.50/bbl but Brent and RBOB prices fell more than WTI did. Limited supply kept benzene prices from falling further on Thursday. There remained some nominations still out for March delivery as traders waited for barrels to arrival on vessel. The fog in the US Gulf Coast had slowed nearby ships and the low water at the Panama Canal was delaying Asia vessels by 10-15 days as well. Eventually the material will arrive, but there are worries that March arrivals could slip to April and April arrivals slip to May. The styrene buyers were still pulling hard as refinery turnarounds and low imports in January and February have kept balances tight. Now that energy has fallen, the next shoe to drop will be the expandable polystyrene and polystyrene buyers pushing back on domestic styrene buying and again de-inventorying, similar to end of last year. The expectation of lower prices for April and May will lead to the expected push back on demand. Styrene producers have already lowered rates and will not be able to lower much further without shutting down or keeping lines that were in turnaround down for extended periods. Early in the day Thursday, April benzene traded at $1.95 and May Port Arthur at $1.90/gal. However, the market thinned afterwards, and everyone sat on their hands as energy and equities gyrated. The bids were below $1.90/gal for the rest of the day for April and May as EU had deals done prompt at $515/mt, which netbacks to near $1.90/gal for US Gulf Coast arrival in April.

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; Donna Todd, donna@petrochemwire.com; Rajesh Joshi, rjoshi@opisnet.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

-Editing by Kathy Hall, kathy@petrochemwire.com; and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


Propylene May Have More Crude-Related Downside; PE Less So: IHS Markit

March 11, 2020

While crude and refined products markets rebounded somewhat on Tuesday (March 10), US propylene's comeback was relatively mild after taking an 11-12% hit on Monday. Polymer grade propylene for March delivery at Mont Belvieu tumbled from 28.75 cts/lb a range of 25.25-25.5 cpp; it was bid up to 26.5 cts/lb Tuesday in a thin market. This begged the question: is there more to come, or had the market found a floor?

pcw 0311

There could be more downside if oil moves even lower, posits Carlo Barrasa, Executive Director of Propylene Research at IHS Markit, as tanking oil prices are just one more bearish fundamental for propylene. 

"Typically, when we examine rapid price declines, we look at matching price patterns and historical analogs to determine likely pricing behavior," Barrasa said. "When news broke that oil prices fell dramatically overnight, we prepared ourselves to see propane prices at around 30 cents, which is what has happened thus far."

Looking to the past to gauge how propylene has behaved, Barrasa noted that "the best analog was the winter of 2016, extreme oversupply of propane plus very weak demand with WTI prices of around $31/bbl, very much like today. On the propylene side, this same analog resulted in a PGP price of 30 cpp (in January 2016)."  

However, unlike the 2016 market, the geopolitical factors regarding oil are combined this time around with the coronavirus influence and high propylene inventories. Barrasa pointed to the early 2009 propylene market, which reacted to a number of varying fundamentals against a backdrop of broader financial market crashes and found a floor at 24.75 cpp. "My sense is that propylene prices have downside risk to roughly mid-20s cpp, but it’s a challenging price to determine because there really is no historical analog to verify this price," he said. "The 1980s, 1990s and early 2000s were totally different fundamental environments for propylene."

Spot ethylene was similarly quiet, after shedding 7% of its value on Monday. March spot prices at Mont Belvieu were pressed down to 12.5 cts/lb, and not even ethane's mild rally lifted them back up on Tuesday. Spot high density polyethylene prices held steady at 30 cts/lb for FOB Houston.

"US ethylene prices remain above ethane cash costs; however, increasing supply length amidst sluggish demand offers limited support for prices," according to IHS Markit's North American Light Olefins most recent weekly advisory report, issued last Friday.

On the downstream polyethylene side, demand will shrink based on recent fundamentals, but the US price is still the most competitive on earth. This limits downside to the US market, noted Nick Vafiadis, Vice President of Plastics and Chemicals at IHS Markit. 

"Based on current expectations it appears that the dramatic drop in crude oil prices will result in a near term decline of about $100-150 per ton on PE prices in China," he said. "While COVID-19 is expected to negatively impact global demand by as much as 1 million tons or more this year, US producers are expected to remain globally competitive in a $30/bbl oil environment despite the compression in ethane to naphtha price spread, so we don’t expect to see a backup in exports."   

 

--Reporting by Kathy Hall, kathy@petrochemwire.com,

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 


Crude Oil Crash: US olefins price drop amid upstream panic

March 9, 2020

U.S. petrochemical markets were not immune to the sharp sell-off in energy markets Monday. Ethylene and propylene activity was thin, but offers kept dropping, while spot market offers for polyethylene and polypropylene all but disappeared.

pcw 0309Ethylene was lower in both the Texas and Louisiana markets. March MtB-NOVA ethylene was down 7.4%, from Friday's close at 12.5cts/lb (an equivalent of 37.1cts/gal). MtB-NOVA ethylene was last seen at this level on June 10, 2019, shortly after it reached a recorded low of 11.75cts/lb (34.898cts/gal) June 3-4, 2019. March Choctaw ethylene was down 1.125cts/lb (3.3413cts/gal), or 8.6%, at 12cts/lb (35.6cts/gal). The low-water mark for Choctaw ethylene was seen June 3-5, 2019, at a level of 12.125cts/lb (36.011cts/gal). The low ethylene prices in June 2019 were the result of an increase in supply, a decrease in demand and decreasing upstream prices. With near-term pricing at an equivalent of $275-$280/mt FOB Mt Belvieu, the arb remained wide open for shipments to flow to any other global market.

The only respite may have come from a drop in the price of Mont Belvieu purity ethane, though in the larger context of the day this may amount to pocket change. The steam cracker feedstock dipped 11.5%, in today's trading, tracing a price range of 12-13cts/gal on fairly respectable publicly confirmed volumes of 230,000 bbl.

The percentage decline was in line with price erosions seen today in the wider energy complex. However, Gulf Coast cracking demand was projected to soften this month even before the crude oil meltdown at the weekend. Dow is expected to take its TX-9 cracker offline ahead of an expansion, and Ineos is expected to put its Chocolate Bayou Olefins 2 plant into maintenance. Together, these events are projected to clip total estimated Gulf Coast ethane demand of 1.8 million b/d by some 5%.

If COVID-19 fears cause overseas ethylene plants that feed US ethane to scale back operations, this could depress ethane exports and add to the downward pressure on the spot ethane price. Against this backdrop, regardless of cash-cost economics vis-a-vis Gulf Coast ethylene, some experts expect the ethane price to continue to shadow the natural gas price in the near term.

Spot propylene prices slumped on a combination of lower front-month offers and lower forward paper activity, giving March MtB-EPC PGP an implied value at market close of 25.375cts/lb (110.4cts/gal). This represents a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. PGP hasn't seen a price near this low since it was at 25.875cts/lb (112.5563cts/gal) Sept. 8-10, 2015; however, PGP's recorded low is 15 cts/lb (65.25 cts/gal) from Dec. 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

The spot benzene market also followed energy prices lower. While the spat between OPEC producers Saudi Arabia and Russia pushed down crude WTI by more than $10/bbl and gasoline prices down by more than 20cts/gal, benzene traders planted themselves on the sidelines. Buyers didn’t attempt to catch a falling knife and preferred to see where prices settle on the energy side first before making their calls. That led to a wide range for benzene for most of the day. Bids for March were sitting near 200cts/gal for most of the day before slowly increasing to over 202cts/gal in the afternoon. Sellers hoping for a quick energy rebound held offers for March closer to 220cts/gal. While that is a wide range, it still is a price decline of nearly 25cts/gal for benzene from Friday. The March/April spread is backwardated by 6-7cts/gal and Apr/May is 3-4cts/gal. 

Little has changed yet from a supply/demand picture on benzene. Additional barrels are headed this way from Asia as China began pushing back on benzene in early February, also related to the COVID-19 virus. China is just now beginning to ramp up rates and logistic issues are being smoothed out in that region. That is a relief as paraxylene producers were filling tanks rapidly and needs China to be able to take in imports. However, there is already some production that has been lowered and that could limit supply moving to the U.S. Gulf Coast for March and April loadings. 

Polyethylene spot markets were edging lower in the first week of March, but traders did not see any immediate reaction to Monday's sell-off in commodities, other than a drop-off in customers' buying interest. U.S. suppliers appeared to have HDPE blow mold and injection grades available for export, while HMWPE film, LLDPE film and, especially LDPE film, grades were less readily available.

HDPE blow mold pricing was last seen at 30-31cts/lb (89.1-92.07 cts/gal) on an FOB bulk railcar basis in Houston; that market had been flat at 32cts/lb (95cts/gal) throughout February.

While PE producers have yet to step out with more aggressive offers, traders were feeling the pressure to trim their inventories. Container logistics were cited as a major concern. Empty containers were lacking in the U.S. Gulf Coast region, mainly due to COVID-19's disruption of transpacific shipments. Shipping companies have canceled outbound bookings, particularly to Asia, and there were concerns that customers will opt to cancel orders when shipments are postponed by logistical problems. This could result in PE cargoes backing up and being sold more aggressively in other parts of the market.

PP spot activity was muted early in the week, and the market has been viewed as short for most of 2020 so far due to planned outages and production issues. PP buyers were watching for downward price pressure from the propylene and further upstream markets. HoPP injection spot prices finished last week at 42cts/lb (182.7cts/gal) railcar FOB Houston.

The U.S. PVC market is somewhat protected at this time from the plunge in oil pricing and the drops in spot and ethylene pricing by the fact that several VCM plants have been having production problems and there has been downtime during 1Q at certain PVC plants. The resulting perceived tightness in the PVC market has enabled PVC producers to attain a 3cts/lb contract price increase in January and the likely implementation of at least a 2cts/lb price hike for February in the face of a 5.75cts/lb drop on contract ethylene prices since October 2019. The PVC market is nearly all contract-based, and it would not see any movements until the March price is retroactively set.

If oil prices remain low for a considerable time, however, PVC producers will lose their cost advantage over European and Asian suppliers, resulting in fewer export opportunities and a surplus of resin backing up into the domestic market. Export prices were in the $840-$855/mt range, an equivalent of 38-38.75cts/lb FAS Houston. In addition, any longer-term effects on the stock market and jobs numbers could impact construction activity, especially for homes, which would affect domestic demand for PVC since the majority of PVC production goes into building materials.

 

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; Donna Todd, donna@petrochemwire.com; Rajesh Joshi, rjoshi@opisnet.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

--Editing by Kathy Hall, kathy@petrochemwire.com; and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 

COVID-19: AFPM IPC Conference in March Still Scheduled to Take Place as Companies Withdraw Participation

March 6, 2020

The 2020 American Fuel & Petrochemical Manufacturers International Petrochemical Conference (AFPM IPC) is still scheduled to take place on March 29-31 in New Orleans, Louisiana, according to an announcement released by the organization on Wednesday.

“At this time, we still plan to proceed as scheduled with this year’s IPC March 29-31 in New Orleans, LA. We will continue to consult with federal, state, and local officials about the risks posed by the Novel Coronavirus Disease 2019 (COVID-19), and will advise you if the status of the meeting changes,” the announcement stated.

Though the conference is still scheduled to occur, many companies are withdrawing their participation citing concerns over COVID-19. Cocktail reception and company meeting cancellations have been trickling in throughout the week, including the cancellation of OPIS PetroChem Wire’s joint crawfish boil with the CME. Kolmar Americas, Inc. announced in a Cocktail Party cancellation notice on Wednesday that, “Regretfully due to the current Coronavirus outbreak Kolmar has decided not to attend AFPM this year.” A Shell Chemicals Reception was canceled on Friday with a note stating, “As concerns over COVID-19 continue to grow and impact customer and partner attendance, Shell Chemicals has decided to withdraw from the 2020 AFPM Conference in New Orleans.”

For several companies that haven’t officially cancelled, some employees have said they are hesitant to travel because of concerns for their own well-being. Moreover, some companies have issued international and domestic travel bans as the virus continues to spread.

The impact the virus has had on petrochemical production has mostly been seen in Asia, and this region is starting to see a rebound from its initial operational cuts from the beginning of this year.

A recent report released on Feb 28 by IHS Markit, the parent company of OPIS, titled "COVID-19 Weekly Focus Report: Status & Implications" stated that "Although COVID-19 continued to impact ethylene production in the week, some producers started to gradually increase their operating rates following improved demand for derivatives production. The operating rate of those downstream-integrated CTO and crackers was recovering in most regions of China. However, ethylene net sellers remained under high inventory pressure and continue to run at a reduced rate." CTOs are coal-to-olefins plants.

The report also said, “Although the demand recovery among converters remained slow, the product inventory pressure among ethylene derivative producers eased during the week. Traffic restriction in most regions of China has moderated, thus facilitating product movement. Some MTO players who were running at reduced rates have started to purchase spot cargoes for their derivatives production.” MTOs are methanol-to-olefins plants.

The propylene market in the region appears to be slower to rebound. The IHS Markit report says that “On-purpose propylene operating rates in China remained low. Tianjin Bohai and Shandong Shenchi postponed the restart of their PDH unit by a month to late-March. Other PDH units in Shandong were still running at a reduced rate. Independent refineries in the region have not yet recovered from unplanned outages at the time of writing. PDH units in East and South China, including Dongguan Grand Resource, Shaoxing Sanjin, Ningbo Fuji and Yangzijiang PC which are integrated with propylene downstream, have recovered and raised their operating rates.” In addition, the report adds that “Propylene demand remained slow, although some downstream producers resumed sourcing propylene from the domestic market this week. OXO-alcohol producers stepped back from the market due to a deteriorated margin, while the buying interest among PP powder producers remained slow.”

The AFPM IPC conference attracts approximately 3,000 industry participants from around the world. The theme of this year’s 45th annual conference is centered around “sustainability and the future of the petrochemical industry.”

--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

LyondellBasell to Invest in China Polyolefins Venture

March 6, 2020

LyondellBasell today announced it has finalized its agreement to form an olefins joint venture in Panjin, China with the Liaoning Bora Enterprise Group, giving it a domestic foothold in the fast-growing Chinese market for plastics.

In the coming months, LyondellBasell will make an equity investment in the 1.1 million mt/yr cracker and polyolefins derivatives complex, which has an expected total cost of $2.6 billion.

Startup of the plant, which is already under construction, is expected in 2H 2020.

LyondellBasell will also market the HDPE and PP output from the complex. Liaoning Bora in 2017 selected LyondellBasell’s Spherizone and Spheripol technologies for the 600,000 mt/yr PP plant, comprising two units, and LyondellBasell’s Hostalen ACP technology for the associated 350,000 mt/yr HDPE unit.

The JV formation is still subject to approval by government authorities, including an antitrust review by the State Administration for Market Regulation.

The PP and HDPE output from the plant is expected to be marketed domestically for packaging, automotive, building and construction, and healthcare and hygiene applications.

According to IHS Markit, China currently represents 40% of global polyolefins demand growth.

China's growing PE appetite was expected to help balance the US petrochemical industry's expansion in recent years, but the US/China trade war has disrupted those plans to some extent.

Last month, the Chinese government added PE and ethylene co-polymers to a list of products for which importers can apply for trade war tariff waivers. Buyers have begun applying for those waivers this week, but current price expectations in China are said to be roughly 3-4 cents/lb below current offers from the US Gulf. 

HDPE blow mold (loop-slurry process) pricing was at 31.5 cents/lb railcar FOB Houston this week, according to OPIS PetroChem Wire.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

 

Copyright, Oil Price Information Service


Analysis: The Changing Dynamics in the Texas/Louisiana Ethylene Relationship

February 28, 2020

As spot liquidity in the Louisiana ethylene market grows, the dynamics in its relationship to the spot Texas ethylene market are changing. In Louisiana, the common hub is at Choctaw, operated by Boardwalk Midstream. In Texas, the dominant hub is at Mont Belvieu, operated by NOVA Chemicals.

Looking at the prompt market activity going back to January 2018, MtB-NOVA ethylene had consistently seen higher prompt trade volumes until late 2019. During that time frame, Choctaw experienced months where it had more prompt volume traded than MtB-NOVA, but not on a consistent basis. The trendlines show that MtB-NOVA prompt trade volumes have been decreasing on a steep decline relative to the gradual increase that Choctaw has been seeing over the last two years.

Furthermore, 43 million lbs reportedly traded in the MtB-NOVA well in January 2020, and 40 million lbs reportedly traded in the Choctaw well. This is the closest month of comparative trade volumes seen at the two hubs in this data set. 

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In addition, January 2020 saw frequent broker markets valuing MtB-NOVA at a premium to Choctaw – either in the form of a trade or a bid/offer. These market spreads between MtB-NOVA and Choctaw resulted in implied values of one location based off the other location’s market(s). As a result, Choctaw was assessed by OPIS PetroChem Wire (PCW) based on its implied spread to MtB-NOVA ten times in January; MtB-NOVA was assessed based on its implied spread to Choctaw only four times in that month (all in the latter part of January). 

During this 25-month time frame, Choctaw ethylene had generally maintained a pricing premium to MtB-NOVA ethylene. However, by the end of 2019, MtB-NOVA was valued at a premium to Choctaw. This trend was first seen in the PCW 45-day weighted averages, then in the PCW calendar averages, and lastly in the PCW 30-day weighted averages for the two locations. 

pcw 2

pcw 3

pcw 4

While this data illustrates that Choctaw had a strong end of the year in 2019 in relation to trade volumes, only time will tell if this trend will maintain its momentum. The same can be said for the pricing premium currently seen at the MtB-NOVA hub versus the Choctaw hub. Month-to-date activity in February shows MtB-NOVA ethylene has been maintaining its premium over Choctaw ethylene for most of the month, with the exception of the two being valued at parity by PCW on February 24 and 25. MtB-NOVA has seen higher month-to-date February prompt trade volumes. 

From a supply/demand fundamentals perspective, Steve Lewandowski, Research and Analysis Executive Director for North American Light Olefins at IHS Markit (PCW’s parent company), points to delayed cracker startups in Louisiana as a partial cause of the increased trade volume seen at Choctaw in 4Q 2019. He also notes that the general flow of ethylene from Texas to Louisiana results in the premiums seen at Choctaw over MtB-NOVA because of the cost to move ethylene east.

Moreover, the industry awaits the upcoming opening of the Enterprise Products’ Mont Belvieu, TX ethylene storage hub (MtB-EPC), which is slated to fully come online in early 2020. Enterprise began initial service of ethylene receipts into the hub in December 2019 and expects full service of both receipts and deliveries to begin in April 2020. The company stated in a January 8, 2020 press release: “Enterprise has designed the system to serve as an open market storage and trading hub for the ethylene industry through storage, connections to multiple ethylene pipelines and high-capacity export capabilities.” 

The world is in the midst of the US market absorbing the effects of the first major investments in North American olefins in decades. As more investment commitments are made, the pricing and trade volume correlations between the major ethylene hubs in the US Gulf Coast ethylene market will continue to evolve.


--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 


Covid-19: Asia petrochemical conference in May postponed

February 26, 2020

The 2020 Asia Petrochemical Industry Conference (APIC) scheduled to be held May 28-29 in New Delhi, India has been postponed due to travel complications related to the ongoing coronavirus epidemic. 
 
"Our preparations for APIC 2020 were proceeding on track and we were quite excited about holding this event – unfortunately, the global health crisis caused by the Corona virus has led to many countries/companies putting out travel advisories restricting travel of their citizens/employees," according to a communication issued Wednesday by the Secretary General of the Chemicals & Petrochemicals Manufacturers' Association, the organization hosting the conference. "As APIC member countries are from the region significantly impacted, we sought the opinion of APIC steering committee members regarding rescheduling of APIC 2020. All steering committee members were of the opinion to reschedule the event. Accordingly, we are postponing APIC 2020, and now it will no longer be held on May 28-29th of this year as planned." 
 
No new date has been set for the conference. Sponsorships and booths that have been booked will remain intact when the event is held later this year.
 
The effect of the virus on petrochemical production in the region has been dramatic. A recent report issued by IHS Markit noted that "around 60% of the ethylene producers in China have reduced operating rates." The report, called "COVID-19 Weekly Focus Report: Status & Implications," estimated that around 179,000 mt of ethylene production could be lost during February alone. Shutdowns and reductions are also affecting polyethylene, vinyls, glycol and styrene production throughout the region.
 
The effect to propylene production in the region has been similar. The IHS Markit report notes that "around 52% of the on-purpose propylene producers in China have reduced operating rates" and estimates that around 588,000 mt of propylene could be lost during February. Downstream polypropylene, acrylonitrile, propylene oxide, phenol and cumene operating rates are also depressed in the region.

 

Daily spot ethylene and propylene prices using a consistent methodology you can trust
OPIS PetroChem Wire's Daily Wire provides closing prices and a summary of the day's trading activity for US ethylene, proylene, polymers and upstream NGLs markets. Begun in 2007, its olefins and polyolefins prices serve as benchmarks for a number of physical and swap contracts that trade on the CME/NYMEX Clearport system. Learn more & try it free

 


 
--Reporting by Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Spot Ethylene Prices Dip as New Steam Crackers Slowly Come Online

February 19, 2020


Spot ethylene prices in Texas and Louisiana have been slipping this month as the Gulf Coast market continued to slowly absorb new production that has finally started up after delays of more than a year for certain units.

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Shintech's new olefins unit at Plaquemine, LA was "on the verge of starting operation" in early February, according to a statement from the company. This plant has been expected to come online since 2Q 2019. The ethane cracker has the capacity to produce 1.105 billion lbs/yr of ethylene (31,000 b/d in ethane demand) and feeds an onsite VCM and PVC complex. 

Indorama announced that its Lake Charles, LA steam cracker had "reached beneficial operations" in late January. The company purchased an olefins plant in 2015 that had been idled by Equistar in 2001. At the time of the purchase, the company said the plant could start up by the end of 2017. That start-up target slipped to end-2018 and then mid-2019 and end-2019. The company announced on January 31 that the plant achieved commercial startup following protests by residence of Sulphur, LA over noise associated with activities at the plant. Its 970 million lbs/yr of ethylene is designated to feed its own ethylene oxide and ethylene glycol operations and support its global PET operations.

Sasol has also brought a 3.3 million lb/yr (93,000 b/d ethane demand) new world-scale olefins plant fully online after struggles in 2019 that escalated to a point where the company's executive management issued a statement in Octobere 2019 describing "a lack of competence" associated with the project that resulted in the departure of several executives at the time. 

Unlike Shintech and Indorama, Sasol has operated a world-scale olefins plant and complex of downstream chemical plants in the US since 2001 with its purchase of certain assets from Condea Vista. Sasol's new plant is on the company's Lake Charles, LA site. Its 2.2 billion lbs/yr of ethylene output feeds new downstream ethylene glycol and polyethylene plants. The steam cracker, which had been expected to start up in early 2019, started up in a limited capacity in August 2019. The company stated at the time that the plant would run at 50% rates as the capacity allocated to the onsite polyethylene units would not be used until those plants started up. The PE plants started up at the end of 2019 but a fire at one of the plants in January caused more delays at the site. As of mid-February, all units were said to be operating at normal rates with the exception of one low density PE plant.

Formosa's new Olefins III unit at Point Comfort, TX did not experience the long delays and challenges that other companies experienced in 2019. The company had originally targeted starting up during 2H 2019. In November 2019 the company issued a statement that the steam cracker would start up by the end of December. In mid-January, the company issued an update that the olefins unit and two polyethylene plants would start up by the end of the month. Formosa is also no stranger to US chemical manufacturing - it has been in Point Comfort since the early 1980s. It built its first cracker at the site in 1994 and built a second cracker there in 1998. The new plant's 2.75 billion lbs/yr ethylene capacity (77,000 b/d ethane demand) will feed new polyethylene plants. 

Coming up, Dow Chemical's TX-9 olefins plant at Freeport, TX is expected to start up new furnaces during 2Q 2020. The plant is one of the Gulf Coast's newer units, starting up in 2017. The new furnaces will increase the plant's ethylene capacity by 1.1 million lbs/yr, bringing it to 4.4 billion lbs/yr and making it one of the largest olefins units in the world. The addition represents only 31,000 b/d of new ethane demand yet to materialize.

Since the start of 2020, spot ethylene prices have moved from the 20-21 cts/lb range (an equivalent of 59.4-62.4 cts/gal) to 14-15 cts/lb (41.6-44.6 cts/gal), a loss of 30% in just six weeks. While low, current pricing is still above lows reached in 2019 of 12 cts/lb (35.6 cts/gal).

Spot ethylene's main price driver has been the balance of new production coming online with associated downstream units, primarily polyethylene, vinyls and ethylene glycol. The downstream markets have faced their own unexpected challenges in 2019 with trade wars between the US and China that have caused a number of tariffs to be enacted and have hampered export volumes from the US as a result. That said, Enterprise’s new ethylene export terminal has enabled regular loadings of cargoes since late December, mostly bound for Europe. This has tempered the threat of a glut of ethylene sitting in the US.

Even at these low prices, ethylene is still a profitable commodity. Ethane, the most popular and commonly used ethylene feedstock in the US, has generally been in the 13-16 cts/gal range, which translates to a cash cost of 7-8 cts/lb. Propane has moved in and out of favor as an ethylene feedstock and is currently gaining in popularity as its own cash cost is around 10 cts/lb, and its use yields more propylene from the cracker as a co-product. With spot propylene currently priced at 29-30 cts/lb, propane has overtaken ethane at certain sites that can switch furnace use to accept the feedstock. 

 

--Reporting by Kathy Hall, kathy@petrochemwire.com; David Barry, david@petrochemwire.com and Rajesh Joshi, rjoshi@opisnet.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


Propane Comes Into Favor as Cracker Feedstock

February 18, 2020

A conceivable scenario may explain, at least in part, the large decline in propane-propylene inventories in last week's government data release that caught some market watchers by surprise.

According to this hypothesis, the steady creep of propane over the past month as the most advantageous feedstock at steam crackers finally might have worked its way into reported domestic demand and inventory numbers.

The distressed price of purity ethane at present would complete this jigsaw.

According to the Energy Information Administration's (EIA's) weekly data release last Wednesday, nationwide propane-propylene stocks declined by 6.18 million bbl in the seven days ending Feb. 7, from 83.45 million bbl to 77.27 million bbl. This represented a drop of some 7.4% in one shot.

A large portion of this draw, 4.35 million bbl, was in PADD3 (Gulf Coast). This already oversupplied region, which holds almost the entire year-on-year inventory surplus nationwide, saw stocks subside from 57.68 million bbl to 53.33 million bbl.

These numbers elicited more than one reaction of surprise among market watchers. But this magnitude of draw between the last week of January and the first week in February has not been that uncommon of late, both at the nationwide and PADD levels.

For example, in 2017, according to EIA historical data, the dip was larger than the one seen last week in absolute as well as percentage terms: a 6.88 million bbl (11%) draw, from 62.65 million bbl to 55.77 million bbl. Again, PADD3 accounted for much of the 2017 erosion -- a 4.69 million bbl draw, from 38.25 million bbl to 33.56 million bbl.

Corresponding January-into-February weekly draws were comparatively more moderate in 2019 and 2018 (nationwide declines of 4.38% and 7.77% respectively), but did not buck the trend.

Meanwhile, domestic demand in the Energy Information Administration's (EIA) Feb. 7 dataset, which is represented by the "products supplied" number in the report, rose a whopping 68%, or by some 850,000 b/d, from 1.24 million b/d in the Jan. 31 week to 2.09 million b/d in the Feb. 7 week.

Domestic production and exports for the Feb. 7 week were within the wheelhouse of recent averages. Besides, received wisdom in the market generally is that domestic demand for propane is at a plateau, and exports are the main avenue to lower stocks.

This made the latest demand number stick out, at least in arithmetical terms, as the apparent mover of the needle when it came to the outsized inventory draw.

However, it is equally interesting to note that EIA-reported demand has spiked from the last week of January to the first week of February in both 2019 and 2018. In fact, weekly demand from the first weeks in February for 2019 and 2018 was almost identical to this year's 2.09 million b/d: 1.99 million b/d (up 23.2% week on week) and 2.01 million b/d (up 31.1%), respectively.

Thus, it turns out that neither the inventory draw nor the surge in reported demand in the latest "surprise" EIA dataset was unprecedented. Nonetheless, this year's developments may have been tinged by a new and recent phenomenon: propane displacing purity ethane as economically the most viable feedstock at steam crackers -- of which almost the entire fleet in the United States resides along the Gulf Coast.

It is worth stressing at the outset that short-term variations in prices alone do not automatically lead to mass feedstock switching at crackers. This could be because of cracker specifications, feedstock storage availability at the operator, etc. Nonetheless, one can see the attraction of a switch to propane just by looking at spot market values for ethylene and propylene.

According to OPIS PetroChem Wire daily pricing data, spot ethylene has been in the 15-16cts/lb. range for much of February, while spot polymer-grade propylene has been in the 29-30cts/lb. range.

Propylene is generally at a premium to ethylene in the United States, as there is far less propylene production capacity than there is for ethylene. While steam crackers are designed to primarily produce ethylene, furnaces that can accept a variety of natural gas liquids (NGLs) can produce varying amounts of co-products.

Ethane is a feedstock that maximizes ethylene output: cracking it produces almost nothing but ethylene. On the other hand, cracking propane yields 15%-20% propylene, and reduces ethylene output to around 50% (the rest of the output is other co-products such as hydrogen).

Current OPIS PetroChem Wire-assessed ethane-based cash costs for olefins production stand at 7-8cts/lb. for February and March. These are handily lower than propane-based cash costs at 10-11cts/lb. However, the attractiveness of ethane based on these numbers alone may not be self-explanatory.

The more nuanced pursuit of limiting ethylene output and increasing availability of the much higher priced propylene might have tipped the scales in propane's favor, at least at the more flexible operators.

According to data from En*Vantage Inc., as of last week propane was the most preferred feedstock at high-severity cracking conditions, yielding a spot net margin of 8.5cts/lb. versus 7.3cts/lb. for ethane (based on a spot Mont Belvieu ethylene price of 15.5cts/lb.) Butane and naphtha yielded margins of 4.8cts/lb. and minus 14.2cts/lb., respectively.

OPIS-assessed spot Mont Belvieu prices provide context. According to the North America LPG Report on Feb. 14, the month-to-date average price for all three assessed grades of propane was 37.8626cts/gal, versus 64.4771cts/gal for the same day in 2019, i.e., a 41.3% decline year-on-year. Front-month WTI crude ended the respective sessions at $52.05/bbl this year and $54.41/bbl in 2019, i.e., only 4.3% lower this year, which highlights the depths to which Gulf Coast propane prices have currently fallen.

"It's real," one steam cracker industry expert said against this backdrop on Thursday last week. "With propane becoming the most favored feedstock a few weeks ago, it took a few weeks for all of us to get swapped over to more C3 feed."

Though the exact reason behind the 850,000-b/d increase in domestic demand from Jan. 31 to Feb. 7 this year may still be hard to pinpoint, he said this increase theoretically "is within the Gulf Coast cracker fleet's ability to switch from ethane to propane."

Alluding to the lag between the time this switch happened and when it actually began to show through in EIA statistics, he noted: "Big ships turn slowly."

In the same vein, he suggested that the 4.35-million-bbl draw in regional PADD3 inventories for the Feb. 7 week may have had to do with a couple of cracker operators moving barrels out of commercial storage (which the EIA reports cover) to proprietary storage (which the EIA reports do not cover) closer to their crackers, for ease of use.

This scenario may arguably be theoretical. But purity ethane is the unfortunate victim in real terms.

This is reflected in the Feb. 14 OPIS-assessed month-to-date average Mont Belvieu price of 13.8566cts/gal, compared with 32.1251cts/gal on the same day a year ago -- a 56.9% slide year-on-year.

Anecdotal comments from the market last month had suggested a potential hit of 50,000-100,000 b/d on regional feedstock demand for ethane because of the creeping attractiveness of propane.

However, purity ethane's current pricing woes stretch beyond this factor alone.

The product endured a stark second half of 2019, which saw the OPIS-assessed price dip below a dime for a brief while at the end of July, the lowest point since assessments began in 1984.

Ethane faces other headwinds on the Gulf Coast: surging inventories, weak natural gas values, the imminent arrival of new fractionation capacity, and not that many new steam crackers remaining for startups.

The challenge from propane does not come at a good time for ethane as a result.

Some pundits project that the Mont Belvieu price may test the 10cts/gal level again.

 

--Reporting by Rajesh Joshi, rjoshi@opisnet.com, Kathy Hall, kathy@petrchemwire.com;

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

Copyright, Oil Price Information Service


 

China moves to lower polyethylene, polypropylene tariff barriers

February 18, 2020


China’s finance ministry announced today that Chinese importers will soon be able to apply for tariff waivers on a list of 696 US and Canadian goods, including plastics such as linear low density polyethylene (LLDPE), high density polyethylene (HDPE) and polypropylene (PP).

While not a blanket lifting of the duties imposed in retaliation for US tariffs on Chinese goods, the tariff exemption applications could benefit North American PE producers, who are counting on emerging markets such as China to absorb much of the new capacity that was built in recent years.

Starting March 2, importers can apply to import specific amounts of items from the waivers list. Upon approval, importers would pay the baseline 6.5% duty for a year, without the additional tariffs imposed as part of the trade war. The tariff exemptions would only apply to approved volumes for a period of one year.

Westlake CEO Albert Chao made note of the tariff waivers during an earnings-related call Tuesday morning, but said it was unclear what demand there would be.

PE traders did not expect much near-term impact. The COVID-19 coronavirus epidemic has brought a dramatic slowdown in China's manufacturing activity and logistics, and domestic producers' polyolefins inventories are at record highs.

Chinese resin buyers will not be back in the international market for big volumes before April or May, one PE trader predicted.

US HDPE blow mold pricing has been steady at 32 cents/lb railcar FOB Houston for more than a month, after recovering from the high 20s cents/lb in late 2019.

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

Copyright, Oil Price Information Service

Celanese Singapore Fire Adds Pressure to Global VAM Market

February 14, 2020

Vinyl acetate monomer (VAM) prices are rising partly as a result of a fire that broke out at U.S. producer Celanese’s Singapore plant on Feb. 7.

Other products produced at the complex, including acetic acid, butyl and ethyl acetate, are holding steady at this time, according to industry analysts.

“Spot VAM prices in Southeast Asia and elsewhere in Asia have risen as a result of the outage, but also as a result of VAM units in China having to decrease operating rates due to logistics restrictions caused by the coronavirus,” said Mike Nash, IHS Markit’s Vice President of Syngas Chemicals.    

Acetic acid, produced primarily by the carbonylation of methanol, is used in the production of PTA, a feedstock for polyester fibre and PET bottle chips. China accounts for 54% of world acetic acid capacity, according to IHS Markit.

Spot acetic acid prices fell this week despite the outage, partly based on the anticipation that the Singapore facility may restart shortly, Nash added.

At its Jurong Island, Singapore petrochemical facility, Celanese operates a 600,000 mt/year acetic acid unit, a 210,000 mt/year VAM unit as well as ethyl and butyl acetate units.

In a statement received by OPIS, Celanese confirmed the fatalities of two people, including a Celanese employee, as a result of the injuries from the incident.

“It is with deep regret and sadness that we share news of the fatalities of two people, including a Celanese employee, from our site in Singapore,” Travis Jacobsen, Celanese’s Director of Global Corporate Communications, said in an email to OPIS.

“Both suffered injuries in an accident that occurred on Feb. 7 while they were performing turnaround preparation work at the site,” Jacobsen said.

Singapore newspaper Straits Times reported that the dead were among a group of workers who were carrying out purging of a hydrocarbon pipeline when a fire broke out.

An investigation has been initiated with support from Celanese experts. The Singapore authorities have been on site and will be conducting a parallel, independent investigation.

“The site is secure, and at this time there are no additional safety concerns related to this incident or the operations of the site,” Jacobsen added.

The fire affected Celanese’s VAM unit and will potentially impact the availability and prices of VAM, buyers in Asia said, who have not been notified of any impending acetic acid or ethyl and butyl acetate supply cuts or shipment delays.

“Due to this incident, we are experiencing minor operational delays for customer shipments. We expect additional information from local authorities during the week of Feb. 15 which will help us determine any additional delays,” Jacobsen said. “We will work with our contract customers to source within our supply network to ensure there is minimal disruption to order delivery.”

The markets in South and Southeast Asia were relatively quiet in late January/early February due to the combination of the Lunar New Year holiday and the Covid-19 coronavirus outbreak, William Bann, Business Manager for Acetyls and Methanol for Technon OrbiChem told OPIS.

“Downstream customers covered requirements for the first half of February prior to the holiday period, so prices were stable during the extended holiday break.  There was not an immediate reaction in the markets, but I would expect to see spot prices for both acetic acid and VAM increase if downstream demand picks up to any extent or if Celanese is forced to halt production in Singapore while officials investigate the incident,” Bann said.

Regional shipments were not immediately expected to be impacted for some of the products produced at the complex as demand has been muted amid the virus outbreak.

“Their local representative has just confirmed that they can supply additional volumes of ethyl acetate for March loading,” a southeast Asian petrochemical importer said, who added that its shipments of the same products from China have been delayed by three weeks due to local transportation lockdowns amid the country’s wide-ranging Covid-19 coronavirus containment measures.

“Normally, we would expect the market to be strengthening as demand returns after the Lunar New Year holiday. This year, however, the coronavirus has led to weaker market sentiment, with end-users reluctant to purchase more than their immediate needs,” Nash said. “Some derivative units remain shut down from before the Lunar New Year holiday. Therefore, the impact of the Singapore outage has been less than it would have been in a seasonally typical market.”

Acetic acid buyers in India, the world’s biggest importer of the chemical, have not been notified of any disruption to supply from Celanese’s Singapore facility. Buyers on the west coast receive around 20,000-22,000 mt a month from the plant, said an Indian ethyl acetate producer.

“My understanding is that Celanese has a surplus of acetic acid because the fire broke out at the (downstream) VAM unit, which is likely to tighten VAM supply to India but will also result in an acetic acid supply overhang,” said an Indian buyer.

“China will be a bigger problem than Celanese, no vessels have loaded from China for the past 20 days,” said a separate Indian acetic acid buyer, referring to the domestic transportation shutdowns that have prevented Chinese producers from delivering product from their plants to shore tanks.

As much as 50% of India’s acetic acid imports come from China, the second acetic acid buyer added.

Nor have Indian acetic acid importers seen any increase in current or near-term prices.

“Acetic acid prices have been falling, methanol prices have crashed, PTA prices have crashed,” said the first buyer.

“If the units remain offline for an extended period, the impact could be greater depending on the progress of the coronavirus and on whether that coincides with other planned or planned outages,” Nash said. “In a steady state, there should be sufficient acetic acid and VAM to meet regional and global demand.”

A lengthy outage could be problematic for Celanese supplies globally as they only recently resumed full operations at Clear Lake, Texas, following a fire at that facility in the third quarter of 2019. The Texas unit produces 1.5 million mt/year of acetic acid and 460,000 mt/year of VAM, according to Technon Orbichem.

“Coincidentally, the Singapore plant was shut for planned maintenance at the same time, leaving Celanese very tight in its global network,” Bann said. “Celanese was able to move material out of China to cover some requirements in other regions, and re-directed some acetic acid meant for internal use to external contract customers. 

“It is understood they purchased large volumes of acetic acid in Q3/Q4 and/or swapped with other producers as well.  Celanese managed to keep its customers supplied and did not declare force majeure, which was quite an achievement,” Bann added.

However, with logistics and transportation disruptions ongoing due to the Covid-19 coronavirus outbreak, it is not clear whether Celanese will be able to load large cargoes from its 1.2 million mt/year Nanjing, China plant in the near-term. 

“Other producers in China could face the same limitations, and that would put further pressure on supplies in the region,” Bann said. “Added to the equation is the fact that Celanese has a long turnaround scheduled to begin in early second quarter at its Clear Lake facility, and it will need to start building inventories ahead of that shutdown.”

India is the largest net importer of acetic acid, and two of its main suppliers are China and Singapore.

“There is some flexibility for producers in the Middle East and Asia to offer additional cargoes to India, but I would expect to see higher offers in the Indian markets for March deliveries,” Bann said.

--Reporting by Trisha Huang Trisha.Huang@ihsmarkit.com, Heather Doyle Heather@petrochemwire.com;

--Editing by Joe Link Joe@petrochemwire.com

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U.S. polyethylene export growth surged in 2019

February 5, 2020

US polyethylene (PE) exports were up 11% in December to 858,634 mt, a new monthly high, according to Commerce Department data released today. For all of 2019, US PE exports totaled 9.33 million mt, 2.84 million mt (44%) higher than 2018.

pcw 0205

The export boom is a result of the dramatic expansion of North American PE capacity in recent years and the abundance of low-cost feedstock that has made PE exports competitive in the global market.

US PE export volumes to China fell by 9% to 584,157 mt in 2019, bucking the overall trend because of the trade war. However, US suppliers adjusted by selling more into Southeast Asia markets. Of the four fastest-growing PE export destinations in 2019, three were in Southeast Asia: Singapore, Malaysia and Vietnam, which collectively took in 845,888 mt more PE in 2019 versus 2018.

Belgium was the second fastest-growing PE export market for the US by volume, accounting for about 10% of the additional exports in 2019. Brazil was the fifth fastest-growing destination.

US PE export volumes will likely need to continue growing in 2020, with three new PE plants totaling 1.32 million mt of capacity scheduled to come online over the next few months and limited growth prospects for the domestic market.

Domestic demand weakened in 2019, according to preliminary data published in January by the American Chemistry Council (ACC). US and Canadian producers’ 2019 domestic sales totaled 31.6 billion pounds (14.3 million mt), down from 32.7 billion pounds (14.8 million mt) in 2018.


--Reporting by David Barry, david@petrochemwire.com 

--Editing by Joe Link joe@petrochemwire.com

 

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January U.S. Propylene Contracts Settle at a Rollover While Spot Prices Ease

January 24, 2020

January monthly contract prices for polymer grade propylene (PGP) were settling on January 24 at a rollover from December at 33 cents per pound (an equivalent of 143.6 cents per gallon).

The monthly contract price has been steadily falling since September 2019. The lowest contract price in 2019 was 33 cts/lb, reached in December. Prior to that, monthly contracts were last at 33 cts/lb in June of 2016. 

Monthly contract prices for propylene tend to be slightly higher than spot prices, and this trend continued in January. Spot polymer grade propylene began this month trading in a range of 31-31.5 cts/lb (134.9-137 cts/gal) and hit 28.5 cts/lb (124 cts/gal) on January 23, a low not seen since the end of 2016.

The declines in spot pricing come at a time when supply was largely considered to be balanced. No operating issues have been heard regarding any propylene splitters. Enterprise's propane dehydrogenation unit at Mont Belvieu was flaring after a product gas compressor and ethylene refrigerant compressor shut on Thursday. The unit is one of three in the US and it can produce 1.65 billion lbs/yr of chemical grade or polymer grade propylene.

Polypropylene plant operating rates were in the low 80s percent in late 2019 and demand has not been robust for propylene as a feedstock. However, there are signs of improving demand for polypropylene in early 2020. Falling domestic PP prices have made PP imports less competitive and spurred restocking activity by domestic buyers. The domestic resale spot price for HoPP injection was 44-48 cts/lb railcar delivered on Friday, down 10-11 cts/lb from a year ago.

pcw 0124

--Reporting by Kathy Hall, kathy@petrochemwire.com and David Barry, david@petrochemwire.com
--Editing by Joe Link   Joe@petrochemwire.com

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Chemical Groups Praise Senate Approval of New North American Trade Agreement

January 16, 2020

The U.S. chemical industry sees economic benefits in the new trade pact with Mexico and Canada that was approved by the Senate today by an 89-10 vote. The U.S. Mexico-Canada Agreement Implementation Act, or USMCA, now moves to President Trump for his signature.

The North American nations agreed to the deal more than a year ago but concerns about labor and environmental issues held up its approval.

The U.S. remains in a historic expansion with more than $200 billion in chemical manufacturing investments announced over the past decade. Much of that investment is export-oriented, meaning the industry must be able to capitalize on its competitive position and depends on a U.S. trade policy that opens rather than closes doors to new markets.

Mexico and Canada are the two largest trading partners for the U.S. plastics industry.

The USMCA maintains NAFTA's tariff-free status for the supply chains, which was a top priority for chemical industry groups.

There are a few changes, however, from the North American Free Trade Agreement (NAFTA) which took effect in 1994. USMCA has stricter rules for auto part rules of origin and requires at least 40% of the parts for a car to be produced in plants where workers make at least $16 an hour. Other changes include updating digital trade and copyright rules.

“We all win under this new agreement,” American Chemistry Council (ACC) President and CEO Chris Jahn said in a statement. “Our unanimous support for ratifying USMCA is a testimony to the collaborative, highly integrated North American chemical manufacturing sector that is uniquely positioned to continue to grow and create new jobs under the new North American trade pact.

The U.S. chemical sector has capitalized on duty-free trade under NAFTA ever since its inception, more than tripling U.S. chemicals exports to Canada and Mexico – from $13 billion in 1994, to $44 billion in 2018. Chemical exports are projected to grow to $59 billion by 2025, the ACC said.

“For the U.S. in particular, companies eyeing the U.S. shale gas revolution and chemical production boom should soon have even greater confidence to invest, knowing that they will be able to trade freely with our industry’s largest trading partners in Canada and Mexico,” Jahn said.

In 2018, U.S. chemical manufacturers exported $46 billion, or one-third of all U.S. chemicals exports, to Canada and Mexico. Around 44% of U.S. chemicals exported to Canada and Mexico are to related parties, according to the ACC.

Nearly a quarter of all U.S. chemical imports are from Canada and Mexico. 64% of those imports are from related parties, according to council.

“We’re thrilled at the prospect of Canada’s ratification of CUSMA to further minimize barriers to North American chemicals trade,” said Chemistry Industry Association of Canada (CIAC) President and CEO, Bob Masterson. “Eliminating tariffs and other barriers to trade has changed the conditions of doing business across borders in North America and encouraged regional investment and economic integration. Producers have become more efficient and more productive because they can benefit from vertical specialization and economies of scale. Canadian, Mexican, and U.S. goods – including chemicals, and goods that require chemicals as inputs – are competitive in the global marketplace because they are products of integrated North American supply chains,” he said.

Canada traded $65.1 billion in chemical products with the U.S. and Mexico in 2018, according to the ACC.

The region is currently experiencing its own renaissance of petrochemical investment.

Current chemical construction in Canada represents some C$10 billion and includes a polyethylene plant and ethane cracker expansion, as well as two separate polypropylene plant complexes each with its own propane dehydrogenation (PDH) units.

-- Heather Doyle  Heather.Doyle@IHSMarkit.com

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Canada Kuwait Petrochemical awards EPC contract for PDH plant


HOUSTON, January 8, 2020 (PCW)--Canada Kuwait Petrochemical Corporation awarded a lump sum EPC contract for its Alberta propane dehydrogenation (PDH) facility and said that the propylene/polypropylene complex is expected to be placed into commercial service by 2H 2023.

Once operational, its listed capacity will be 550,000 mt/yr of propylene, which will be fed from the PDH unit into the site's PP plant.

Previously, the in-service date was projected as mid-2023.

The contract, which was awarded to Heartland Canada Partners, a joint venture of Fluor and Kiewit, will fix approximately 60% of the cost of the PDH/PP facility so far. The contractor selection for the PP part of the complex is ongoing.

Pembina Pipeline Corporation, which together with Petrochemical Industries Company of Kuwait is developing the PDH/PP complex, has revised its proportionate share of the capital cost of the PDH/PP Facility, including the 100 percent directly-owned supporting facilities, to $2.7 billion. Nearly a year ago, Pembina's share was estimated at $2.5 billion.

The complex will be capable of converting about 23,000 b/d of propane into 550,000 mt/yr of PP.

The final investment decision for the PDH/PP complex was announced in February 2019. The facility will be located adjacent to the Redwater Fractionation Complex, just north of Fort Saskatchewan, Alberta.

– David Barry   david@petrochemwire.com

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October PGP contracts settle lower as inventories rise

HOUSTON, October 31, 2019 (PCW) – October polymer grade propylene (PGP) negotiated contracts have settled at 37.5 cpp, down 1.5 cpp from September. Chemical grade propylene (CGP) contracts also settled down 1.5 cpp at 36 cpp.

The October PGP contract price is the lowest since June, when PGP contracts settled at 36.5 cpp. PGP contract prices have fluctuated in a relatively narrow band of 35.5-40 cpp this year. By comparison, 2018 saw a PGP contract range of 42-61 cpp.

In the spot market, October PGP at the MtB-EPC hub traded Wednesday at 34.5-34.75 cpp for October delivery. It has traded in a range of 33.25-37 cpp this month.

The OPIS PetroChem Wire MTD 45-day weighted average for October PGP stands at 34.548 cpp, down 2.397 cpp from Sep.

US propylene inventories rise

Meanwhile, US nonfuel use propylene inventories climbed for a seventh straight week to a 23-week high of 5.031 million bbl, according to EIA.

pcw 1104

The EIA report for the week ending October 25 showed a 328,000 bbl (7%) inventory build, the largest weekly uptick since February 2019. Current propylene inventories are very close to the 52-week average of 5.021 million barrels.

The recent trend of rising propylene inventories and falling prices has occurred against a backdrop of lower supply but also weaker demand.

Gulf Coast refinery utilization has averaged 87.5% over the past four weeks; the five-year seasonal average utilization is 89.8%. Later in 4Q, Gulf Coast refinery utilization usually ramps into the low to mid-90s on a percentage basis.

Also on the supply side, several recent outages of Gulf Coast crackers and on-purpose propylene plants have pushed production down, although some of these units were understood to be restarting within the past week. Month-to-date maximum Gulf Coast operating rates for steam crackers and PDH plants were estimated at 90% as of October 25, according to OPIS PetroChem Wire.

Downstream, PP demand has been lackluster in recent months, with 3Q operating rates estimated in the mid- to upper 80s percentage. In October, the PP market has been balanced despite at least three PP suppliers carrying out planned maintenance work in October. HoPP raffia/injection exports have been reported at 41-45 cpp railcar FOB Houston, but traders suggested that prices at 40 cpp or lower would be needed to secure large-volume orders going forward.

There have also been reports that the propylene arb to Asia, which had been open late in 3Q, was closed again in October. 

– David Barry,  David@petrochemwire.com

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US PET resin exports, imports down; imports surge from S. Africa, Vietnam

pcw 1023HOUSTON, October 23, 2019 (PCW) -- US exports of PET resin totaled 47,647 metric tons in Jan-Aug 2019, down 7.6% from Jan-Aug 2018, the latest US Commerce Department data show. Malaysia was the second top export destination after Mexico.

US PET resin imports were also lower, at 569,083 mt in the first eight months of 2019, valued at $699.9 million, down 11.6% from the same 2018 period.

Mexico remained the top source of imports in the 2019 period at 139,080 mt, although this was down by 36.7% from Jan-Aug 2018. Imports from South Africa surged to 42,991 mt from 20,428 mt in Jan-Aug 2018; they were also up sharply from Vietnam at 45,796 mt, up from 1,513 mt in Jan-Aug 2018.

Most PET resin, produced by processing hydrocarbons, is used to make single-use plastic bottles, containers and packaging, and other products like strapping PET industrial tape.

 

 

-- Xavier A Cronin, xavier@petrochemwire.com

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US ethylene prices jump amid supply speculation; ethane eases

HOUSTON, October 17, 2019 (PCW) -- Spot ethylene prices jumped nearly 20% on Thursday in Texas and Louisiana to the mid-20cts/lb level (an equivalent near 75 cpg) as speculation emerged about tightening prompt supply amid ongoing plant outages and reductions. Spot ethane, meanwhile, stopped its ascent toward the 20 cts/gal mark (roughly 6.75 cts/lb equivalent) and drifted lower.
 
Against a backdrop of waiting for new ethylene production from Shintech and Indorama and full steam cracking rates from Sasol and the Lotte Chem/Westlake venture, availability has been reduced from ExxonMobil's Baytown site after one of its steam crackers shut related to a co-product tank fire at the end of July. Shell also continues to perform planned work at one of its steam crackers at Norco in Louisiana. Earlier this week, both of Ineos' units at Chocolate Bayou (Texas) experienced operational issues related to a steam supply interruption. 
 
The cumulative effect of these situations has kept the ethylene market speculating about the state of supply. Spot pricing for October ethylene at the Mont Belvieu-NOVA hub had been drifting lower in recent weeks, from 29 cts/lb (86 cts/gal) at the start of the month to 20 cts/lb (59 cts/gal) this past Monday. After a few days of low activity, ethylene roared back to life on Thursday morning, with Oct MtB-NOVA material trading three times at 24 cts/lb (71.3 cts/gal) and Oct material for delivery elsewhere in Texas trading up to 26 cts/lb (77.25 cpg), while Oct ethylene in the Choctaw (Louisiana) hub traded up to 25 cts/lb (74.25 cpg).
 
Downstream demand from the plastics market has not been stellar, but it has been consistently steady in the domestic market and has been battling weak demand from international markets. The recent return of Chinese buyers from the weeklong national holiday did not produce a surge of international demand, and market sentiment stayed weak overseas. Spot high density polyethylene prices in the bulk railcar market have dropped this month, but while ethylene shed 45% of its value in the first half of October, HDPE lost just 3%, moving from 33 cts/lb (98 cts/gal equivalent) to 32 cts/lb (96 cts/gal). 

--Kathy Hall, kathy@petrochemwire.com

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US PE producers react to ethylene, NGLs volatility and issue new price increase notices

HOUSTON, September 25, 2019 (PCW) -- US polyethylene producers have either high hopes to boost margins or strong safeguards to protect against a spike in ethylene prices. Contract PE sellers (who set a single price for a month that is typically communicated in a letter notifying customers of the increase delta) have an active 5 cents per pound (cpp) increase issued for September and many have issued a further increase of 8 cpp for October deliveries. 

At the heart of many of these efforts is the concern over ethylene pricing, as it makes up most of the cost to produce polyethylene. Spot ethylene, however, has been tricky to pin down for those trying to identify a trend.

pcw 0925

Early in September, spot ethylene prices in the Mont Belvieu area (the dominant benchmark price) were in the low 20 cpp zone and even dipped below 20 cpp by Sep 5. However, they steadily rose to 25.25 cpp by mid-month and shot to 27 cpp by Sep 18. However, by the time the PE producer letters began rolling out for October, spot ethylene had changed directions and was drifting down to 25 cpp. This morning, Oct Mont Belvieu ethylene traded multiple times at 24 cpp, its new low for the month.

Ethylene's drivers are fundamentally simple: NGLs pricing and ethylene supply availability. NGLs have been just as unpredictable, following energy markets that often surge on political news and wane on follow-up news.

Mont Belvieu ethane prices started September averaging above 20 cents per gallon (cpg) – price levels not seen since early June – as demand picked up from new and returning cracking capacity. One consultant estimated this capacity was near 1.7 million b/d at present, up 200,000 b/d from August. Yet supplies of ethane are still viewed as more than abundant, and this could lead to a supply/demand tug-of-war going forward. On Wednesday, ethane had backed off to 19-20 cpg from a midmonth average peak at 23.6875 cpg.

Propane and normal butane at Mont Belvieu, meanwhile, appeared more sensitive to the geopolitical moves in petroleum futures. Prices for both spiked on Sep 16 and have since been backtracking, though neither has pulled back to their early month lows. Between Sep 3-16, non-TET propane moved from 39.8125cts/gal to 50.0625cts/gal – including a 7cts one-day surge when news of the Saudi attacks hit – and were last seen around 45cts/gal. Non-TET normal butane peaked Sep 16 at an average 59.875cts/gal from just around 50cts/gal at the start of the month and were last seen around 55cts/gal.

Ethylene supply has not necessarily been tight inasmuch as most plants were operating well and the one storm that has swept through Texas appeared to cause two minor closures for petrochemical plants. The ongoing saga of waiting for new production to start up, however, weighs heavily on the ethylene market. Four new steam crackers have been expected to have started producing many millions of pounds of ethylene each day in the Lake Charles-Plaqumine region of Louisiana: Shintech, Sasol, Indorama and the Lotte-Westlake joint venture. Sasol's plant is running but is not yet at normal rates; the others are expected to start up shortly. As each week goes by without seeing this capacity, however, shifting balances in the Gulf Coast can agitate some to speculate on the state of future supply, which can inspire some testing of support and resistance levels. For Sep and Oct spot ethylene, this has been from the low to upper 20s cpp.

What that means for the polyethylene market in terms of the likelihood of their contract prices increasing remains to be seen. Spot PE has been largely indifferent to the upstream price swings, however, with the benchmark high density blow molding grade PE price staying firmly in the low to mid 30s cpp range and its companion linear low butene film grade PE staying in the low 30s cpp so far this month.

--Julia Giordano, julia@petrochemwire.com
--Xavier Cronin, xavier@petrochemwire.com
--Jessica Marron, jmarron@opisnet.com
--Kathy Hall, kathy@petrochemwire.com

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Spot petchem prices barely move as markets await impact of Imelda

HOUSTON, September 19, 2019 (PCW)--Spot olefins markets were silent in Texas, with no bids or offers seen at all for prompt material, following the news that ExxonMobil has completed shutdowns of the chemical plants at its Beaumont, Texas, site as Tropical Storm Imelda moves through the area. Spot ethylene has traded higher in recent days, with September reaching 27 cpp. Wednesday afternoon. Spot propylene has been steady this week at 36.5 cpp.
 
Spot benzene prices were up 1-2 cpg at 254-260 cpg DDP HTC for September and at 256-263 cpg for October delivery. An upcoming turnaround scheduled at ExxonMobil's refinery had limited the benzene market's expectations for product from the site this month; effects of the storm on nearby styrene production at Bayport also muted the effect of the Beaumont shutdown.
 
ExxonMobil's chemical assets at Beaumont include a world-scale olefins plant which has the capacity to produce 4.932 million pounds of ethylene per day, representing 3.2% of Texas ethylene capacity. The site also has the capacity to produces 1.2 million pounds of polymer-grade propylene per day and has six polyethylene trains with a total capacity of 5.6 million pounds per day.
 
Flooding was not just a concern for Beaumont -- the markets were keeping an eye on effects to the nearby Port Arthur area, which is home to several major refining and petrochemical sites, including the joint BASF/Total complex, as well as Chevron Phillips and Flint Hills Resources.
 
In the Houston area, a lightning strike Wednesday evening caused a brief power outage and process upset at Bayport Polymers' 1.1-billion-lb./yr PE facility in Pasadena, Texas. An update on the plant's status was not immediately available Thursday morning.
 
Process upsets were also reported Wednesday evening at LyondellBasell in La Porte, Texas, and American Acryl in Pasadena. No further details were confirmed.
 
Resin buyers were alerted to potential trucking delays around Houston due to roadway flooding, and Interstate 10 was closed west of Beaumont due to impassable flood waters, according to the Texas Department of Transportation.

--Kathy Hall, kathy@petrochemwire.com

--Julia Giordano, julia@petrochemwire.com

-- David Barry, david@petrochemwire.com

-- Kevin Wallman, kevin@petrochemwire.com 

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Dow plans more on-purpose propylene with cracker retrofit

HOUSTON, August 20, 2019 (PCW) – Dow Chemical announced today that it will retrofit its LA-3 cracker in Plaquemine, LA with fluidized catalytic dehydrogenation (FCDh) technology to produce more than 100,000 mt/yr of additional on-purpose propylene.

The project, which is expected online by the end of 2021, will not reduce the unit’s current ethylene production capacity of 1.066 million mt/yr. The LA-3 cracker underwent a 250,000 mt/yr expansion in 2016, which also increased its ethane cracking capability to 80%.

Dow said the retrofit will enhance asset utilization and help meet growing demand for its differentiated polyolefins products, citing consumer, infrastructure and packaging end-markets.

Propylene historically has been supplied as a byproduct of refineries or steam crackers, but the substitution of low-cost ethane for heavier cracker feedstocks has reduced the output of cracker byproducts, including propylene, creating the need for other sources of propylene to balance the market.

Because of the reduced byproduct propylene supply, the US Gulf propylene market in recent years has suffered from volatility and high prices, with OPIS PetroChem Wire’s monthly spot average for PGP topping out at a 45 cpp premium to ethylene in June 2018 and spot averages swinging as much as 15 cpp from one month to the next last year.

New propane dehydrogenation plants started up by Dow and Enterprise in the past few years have helped to smooth out the volatility and bring US Gulf propylene prices to more competitive levels in the global market.

Dow claims that its FCDh technology can reduce capital expense by up to 25% and lower energy usage by up to 20 percent compared to conventional PDH technologies. It recently licensed the technology to PetroLogistics II for a new stand-alone PDH facility that is planned for the Gulf Coast.

– David Barry,  David@petrochemwire.com

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Ethane Ships' LPG Voyages Highlight Cutthroat Feedstock Competition

August 6, 2019

Two multi-gas carriers that typically conduct "milk runs" carrying American ethane into charterer Ineos' European steam crackers have completed voyages to the Continent carrying propane and butane.

The dual cargo switch underscores two interlinked situations -- an over-supplied U.S. ethane market beset with low prices, and competition to ethane posed by compellingly priced LPG (i.e., propane and butane) for use as feedstock in steam crackers.

IHS Markit Waterborne data showed the multi-gas carrier JS Ineos Independence departing Enterprise Products Partners' export docks on the Houston Ship Channel on July 22 with a 149,040-bbl cargo of propane, and heading to Europe.

Sistership JS Ineos Ingenuity departed the Marcus Hook, Pa., export docks with a 161,400-bbl cargo of butane on July 25, also heading to Europe.

According to IHS Markit vessel-tracking data, the JS Ineos Independence appeared to be discharging its cargo in Antwerp, Belgium, at presstime. The JS Ineos Ingenuity had departed the Europoort terminal in Rotterdam in the Netherlands and was signaling Le Havre in France as its next destination.

The JS Ineos Independence cargo appears headed into tankage operated by SHV Energy, the anchor leaseholder for storage in Antwerp which imports for retail usage. The JS Ineos Ingenuity's discharge plans were less clear, though there are petrochemical feedstock outlets operated by LyondellBasell in Rotterdam and Total in Le Havre.

Both ships belong to the custom-built "Dragon Class" series of vessels, meant to fulfil Ineos' long-term U.S. ethane procurement contracts for crackers in Rafnes, Norway and Grangemouth, Scotland. Both vessels typically source ethane cargoes from Marcus Hook as well as Enterprise's ethane docks at Morgan's Point on the Houston Ship Channel.

However, since the ships' specifications allow them to carry a variety of natural gas liquid (NGL) cargoes, Ineos has the flexibility to deploy or freelance them into alternate trades if market conditions warrant such a switch.

A global macroeconomic snapshot of the prevailing economics for NGLs and olefins provide the backdrop to the dual cargo switch.

On the ethane front stateside, the OPIS-assessed price for Mont Belvieu purity ethane has slumped to just more than a dime a gallon from the end-2018 levels of 30cts/gal. This is attributed in part to surging ethane supplies that have swollen ethane inventories to long-term highs, along with weak natural gas prices that are incentivizing high ethane extraction in the field.

However, the lower ethane price has not translated into an advantage for that product as a feedstock for ethylene steam crackers. This, in turn, is because ethylene prices too are struggling and ethylene inventories also are high. This has seen existing crackers on the Gulf Coast moderate their operations while new crackers are coming on line only in slow motion, which means the hoped-for surge in demand for ethane has not yet materialized.

However, there is another major factor that is driving ethane's current weakness: competition from propane and butane as a feedstock.

Propane and butane inventories in the U.S., too, are above cyclical highs, and propane and butane prices, too, are struggling. The OPIS-assessed prices for Mont Belvieu non-TET (i.e., product stored in Enterprise Products Partners caverns) propane and butane yesterday were 44.125cts/gal and 50.1875cts/gal, compared with the end-2018 prices of 62.9375cts/gal and 75.375cts/gal, respectively.

Against this backdrop, propane and butane have established themselves as formidable feedstock competitors. Cracker economics in Europe show the same pattern, pitting ethane against an increasingly assertive slate of rivals.

In the U.S., the OPIS NGL Forwards Report yesterday noted that on cash cost basis relative to spot ethylene pricing, ethane, propane and butane all were profitable relative to U.S. spot ethylene, which was valued Tuesday morning at 18.5cts/lb. (roughly 55cts/gal) at Mont Belvieu and 24cts/lb. (71.25cts/gal) at Choctaw, La.

Most of the steam crackers in North America are "light" in terms of their feed slates, with most furnaces designated for ethane as opposed to heavier feedstocks such as propane or butane. Sources familiar with the steam cracking scene on the Gulf Coast have noted that at high severity cracking, butane in fact is the most preferred feedstock, generating a spot net margin of around 15cts/lb., versus around 11cts/lb. for ethane and 6cts/lb. for naphtha.

This has boosted petrochemical demand for butane, as cracker operators look to consume as much of it as their furnaces will allow. The measurable shift in switching from ethane to butane for a steam cracker is that the amount of ethylene is minimized. Cracking ethane can yield 75-80% ethylene; cracking propane or butane yields closer to 40% ethylene. Conversely, the opposite occurs with co-products, as cracking ethane yields less than 20% propylene and cracking propane or butane yields nearly 50% propylene.

However, while ethylene is abundant, propylene is fundamentally tight in the U.S. because there is much less of it. This is reflected in the current price of polymer-grade propylene of around 35cts/lb. ($1.50/gal). This offers more favorable bottom-line economics with the use of feedstocks other than ethane.

The substitution of ethane tankers to haul LPG instead has materialized on this canvas.

--Dermot McGowan, dmcgowan@opisnet.com

--Rajesh Joshi, rjoshi@opisnet.com

--Kathy Hall, kathy@petrochemwire.com

--Julia Giordano, julia@petrochemwire.com

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US polyethylene exports up 50% in 2019 YTD

HOUSTON, August 6, 2019 (PCW) -- US polyethylene exports during 1H 2019 surged to 4.34 million mt, up by 1.44 million mt (50%) from a year earlier, according to new Commerce Department data. That represents approximately 16,000 hopper cars worth of additional resin.

The markets attracting the most new volume have been Belgium, Vietnam and Malaysia, followed by Singapore, Brazil and Turkey.

China was one of the few countries to receive less PE volume in 1H 2019 than a year earlier. The US shipped 392,958 mt of PE to China/Hong Kong in 1H 2019, down 49,197 mt (-11%) from 1H 2018. Despite the ongoing trade war, China (including Hong Kong) was the third largest destination for US PE exports after Mexico and Belgium. 

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--David Barry, david@petrochemwire.com

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ExxonMobil Baytown Olefins Plant fire makes for a busy day for ethylene trading

HOUSTON, August 1, 2019 (PCW) -- On Wednesday, July 31 at 11 am US Central Time, an explosion occurred at the ExxonMobil Baytown Olefins Plant (BOP) yesterday due to a loss of containment on the propylene recovery unit that resulted in a fire that burned a light hydrocarbon mixture of propane and propylene. A company spokesperson reported that the impacted unit has been shut down and stabilized and the rest of the complex is operating at reduced rates.

There are three olefins units at Baytown, known as BOP (Baytown Olefins Plant), BOP-X and BOP 2X. BOP has an ethylene capacity of 2.55 billion pounds per year (3.3% of US capacity), BOP-X has an ethylene capacity of 2.3 billion pounds per year and BOP-2X (a new plant that came online in 2018) has an ethylene capacity of 3.3 billion pounds per year. The Baytown site has three propylene units designed to upgrade propylene co-product from the steam crackers. They each have a polymer grade propylene capacity of 700 million pounds per year. The affected olefins unit is a flex-cracker, meaning that it cracks mostly ethane but it has furnaces that can accept heavier NGLs. The other olefins units are ethane crackers.

Spot ethylene prices did not immediately react to the incident Wednesday afternoon; values rose from 16.25 cpp (48.5 cpg equivalent) for Aug to end the day around 17.25 cpp (51.5 cpg). On Thursday morning, however, a flurry of spot activity saw 20 new ethylene deals get done within a two-hour period , and Aug prices popped to 19.5 cpp (57.5 cpg).

-Kathy Hall, kathy@petrochemwire.com 

-Julia Giordano, julia@petrochemwire.com 

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Although the indicent damaged a propylene unit at the site, the spot propylene market did not appear to react at all. Aug po

US nonfuel use propylene inventories drop to eight-month low: EIA

HOUSTON, July 24, 2019 (PCW) -- US nonfuel use propylene inventories fell by 239,000 barrels to 4.085 million barrels last week, the lowest level since November 2018, the Energy Information Administration said today.

Propylene inventories have dropped four weeks in a row, and are down in nine of the past 12 weeks.

While still higher by 50% versus a year ago, propylene inventories are 18% lower over the past four weeks and are more than 10% below their 52-week average.

Meanwhile, US Gulf refinery utilization was down 4.3 percentage points at 91.1% last week, which is below the five-year average for this time of year. 

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--David Barry, david@petrochemwire.com

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ExxonMobil Beaumont startup leads next wave of new Gulf Coast polyethylene plants

HOUSTON, July 23, 2019 (PCW) -- ExxonMobil notified customers Monday that it has begun production on a new 650,000 mt/yr (1.43 billion lbs/yr) PE unit in Beaumont, TX, the first of several new PE plants scheduled to start up along the US Gulf Coast during 2H 2019.

The new LLDPE/mLLDPE unit is similar to two units already in service in Mont Belvieu, TX since 2017; it will increase the Beaumont site’s capacity by 65% to 1.7 million mt/yr, with access to rail and packaging facilities.

A letter to customers said the expansion will help meet strong global demand growth for products used in liquid and food packaging, construction liners and agricultural films.

Prior to commercial sale of the new products, extensive testing will be performed to confirm functional equivalence in processing and performance, the company said.

Three other PE manufacturers have startups scheduled for 2H 2019:

  • Formosa in Point Comfort, TX (400,000 mt/yr LDPE and 400,000 mt/yr HDPE/LLDPE)
  • LyondellBasell in La Porte, TX (500,000 mt/yr HDPE)
  • Sasol in Lake Charles, LA (420,000 mt/yr LDPE)

Sasol and Formosa also have olefins plants under construction and scheduled to start up later this year in support of their new resin capacity.

--David Barry, david@petrochemwire.com

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Tropical Storm Barry closes in on Louisiana: Update 1

Tropical Storm Barry was moving at 5 mph with 40 mph winds towards New Orleans at 1 pm Central Time on Thursday (July 11). The NOAA's National Hurricane Center predicted that the center of Barry will be near the central or southeastern coast of Louisiana Friday night or Saturday. 

As of Thursday afternoon, the storm's path formed a wide cone that includes Louisiana's Norco, Plaquemine, Baton Rouge, and Lake Charles areas. The cone extends into east Texas, which includes the Port Arthur/Beaumont area and also north up to Memphis. 

CLICK HERE to view a map of the storm's path and chemical production sites in the region. 

Landfall is estimated to be in Louisiana late Friday or early Saturday. Tropical Storm warnings and Hurricane watches are in effect for much of the Louisiana coast. A State of Emergency for all of Louisiana was delared by the state's governor on Wednesday (July 10). 

The slow-moving nature of the storm has created expectations of sustained heavy rains and likely flooding in many areas. 

New Orleans-area railyards have issued embargoes for all railcar traffic. The New Orleans Public Belt Railroad will conclude operations at the close of business Thursday.

The Port of New Orleans container and breakbulk terminals ceased operations on Thursday. 

Phillip 66 was shutting its Alliance refinery at Belle Chasse, Louisiana in preparation for the storm's arrival. 
 
Petrochemical & plastic production sites in the projected path of the storm include: 

 

LOUISIANA

Americas Styrenics at St James
BASF at Geismar
Deltech at Baton Rouge
Dow at St Charles (Taft)
Dow at Plaquemine
Equistar at Lake Charles
ExxonMobil at Baton Rouge
Formosa at Baton Rouge
Indorama at Lake Charles
Lone Star at Geismar
Lion Copolymer at Geismar
Marathon at Garyville
Occidental at Geismar
NOVA at Geismar
Sasol at Lake Charles
Shell at Norco
Shintech at Plaquemine
Total at Carville
Westlake at Lake Charles
Westlake at Plaquemine

TEXAS

BASF at Port Arthur
Chevron Phillip at Orange
Chevron Phillips at Port Arthur
DowDuPont at Orange
ExxonMobil at Beaumont
Flint Hills at Port Arthur    
Honeywell at Orange
Huntsman at Port Neches
    
BASF's olefins production at Port Arthur had been shut in early April for maintenance; it remained shut.    

The sites listed above represent approximately:
    -- 72 million pounds of ethylene output per day (36% of Gulf Coast capacity)
   --  17 million pounds of PGP output per day (20%)
   --  6.5 million pounds of CGP output per day (19%)

Refineries with propylene production include sites at Chalmette, Norco, Meraux, Convent, Port Allen, Belle Chasse, Baton Rouge and Lake Charles, Louisiana and Beaumont and Port Arthur in Texas. Output of RGP mix at the Louisiana sites totals 120,000 barrels per day; RGP mix output from the Texas sites totals approximately 50,000 b/d. 

-- Kathy Hall, kathy@petrochemwire.com 

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Storm targets more than 30% of Gulf Coast ethylene production

HOUSTON, July 10, 2019 (PCW)--A tropical depression in the Gulf of Mexico may develop into a hurricane by the weekend, targeting an area of Louisiana rich with petrochemical plants, according to a forecast by the National Hurricane Center.

If storms with similar projected paths are an indicator or the plants at risk, more than 35% of the Gulf's ethylene capacity and 20% of finished grade propylene capacity could be affected. 

A hurricane watch has been issued from the mouth of the Mississippi River westward to Cameron, Louisiana, according to the Hurricane Center's latest advisory. A tropical storm watch has been issued from north of the mouth of the Mississippi River to the mouth of the Pearl River.

Steam crackers in eastern and central Louisiana include Dow at St Charles (Taft), Shell at Norco, NOVA at Geismar, Dow at Plaquemine, and ExxonMobil at Baton Rouge. These units represent a combined ethylene capacity of slightly more than 36 million pounds per day (13 billion lbs/yr), or 18% of Gulf Coast output. Polymer grade propylene production in this area represents a total of nearly 9 million pounds per day (3.2 billion lbs/yr), or 10% of Gulf Coast output. Chemical grade propylene production in this area represents slightly more than 6 million pounds per day (2.3 billion lbs/yr), or 7% of Gulf Coast output. Refinery grade propylene production in this area is concentrated at the refineries at Chalmette, Meraux, Norco, St Charles, Garyville, Convent and Baton Rouge, with a total output of nearly 100,000 b/d of RGP mix.

West of those in Lake Charles are Westlake's crackers and Sasol's cracker. These units represent a combined ethylene capacity of slightly more than 11 million pounds per day (4 billion lbs/yr), or 6% of Gulf Coast output. There is very little CGP or PGP production in Lake Charles, and the area represents just 1% of Gulf Coast output. Refinery grade propylene production in this area is about 20,000 b/d.

Across the Texas border are Flint Hills Resources, Chevron Phillips and BASF at Port Arthur, ExxonMobil at Beaumont and DowDuPont at Orange. These units represent a combined ethylene capacity of nearly 25 million pounds per day (9 billion lbs/yr), or 12% of Gulf Coast output. Currently, BASF's unit is shut as it began a scheduled turnaround in early April; it is past its previously expected restart timeframe of early June. Polymer grade propylene production in this area represents a total of 8.5 million pounds per day (3 billion lbs/yr), or 10% of Gulf Coast output. Chemical grade propylene production in this area represents nearly 3.5 million pounds per day (1.25 billion lbs/yr), or 4% of Gulf Coast output. Refinery grade propylene production in this area is concentrated at the refineries at in the Port Arthur and Beaumont areas totals a little more than 50,000 b/d of RGP mix.

On the natural gas liquid (NGL) front, the export main nerve center of the Houston Ship Channel appeared to lie outside the storm’s direct path as of Wednesday afternoon, though the LPG export hub in Nederland, along the Sabine Neches Waterway some 100 miles east of Houston, could see some impact. 

--Kathy Hall, kathy@petrochemwire.com
--Julia Giordano, julia@petrochemwire.com
--Rajesh Joshi, rjoshi@opisnet.com

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Chevron Phillips, Qatar Petroleum to build ethane cracker, HDPE units in Qatar

HOUSTON, June 24, 2019 (PCW) – A new 1.9 million mt/year ethane cracker and two HDPE derivative units with combined capacity of 1.68 million mt/year are planned for Qatar, Chevron Phillips Chemical announced today.
CPC said that it had partnered with Qatar Petroleum to build the petrochemical complex in Ras Laffan Industrial City. QP will have 70% ownership, CPC 30%. Planned startup is late 2025.
CPC said it is licensing its MarTECH loop slurry process for producing HDPE at the plant and that it would also provide project management, engineering and construction services.

-- Xavier A Cronin, xavier@petrochemwire.com 

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US polyethylene spot prices hit 10-year lows

HOUSTON, June 17, 2019 (PCW) -- US polyethylene (PE) spot prices fell to their lowest levels since January 2009 last week in reaction to over-capacity and falling feedstock costs.

HDPE blow mold in the Houston railcar market closed last Friday at 36.5 cpp, according to OPIS PetroChem Wire data. LLDPE butene film has also hit 10-year lows this month, closing last Friday at 36 cpp railcar FOB Houston.
Prices were last at these levels during a stretch from November 2008 to January 2009, when the US economy was in the Great Recession and NYMEX crude oil futures were trading in the $30s/bbl.

However, while the 4Q 2008-1Q 2009 PE market was driven by weak demand and falling feedstock costs, the industry today faces a new challenge from aggressive capacity expansion that has its roots in the shale gas boom earlier this decade.

According to preliminary figures from the American Chemistry Council (ACC), US and Canada PE production for January-May 2019 totaled 20.3 billion pounds, up 7% from the same period in 2018 and up 18% from 2017.
In addition, US PE producers are scheduled to bring online five new units during 2H 2019, representing 2.37 million mt/yr (5.22 billion lbs/yr) of new capacity, or a 10% expansion of existing US and Canada capacity.

All that additional output is going into the export market, because domestic sales through the first five months of 2019 are flat from 2017.

In the past month, there have been new signs that resin consumption in China is slowing down, including a sharp drop in polyolefin imports for April. This is blamed partly on US/China trade tensions.

Market sentiment is also depressed in Southeast Asia, which along with Europe is one of the fastest-growing markets for North American PE exports.

As PE buyers in other regions see ample offers and falling prices, the tendency is to put off orders for as long as possible to hedge against further downside price risk.

If overseas buyers remain in wait-and-see mode, it will be difficult for North American manufacturers to meet their end-of-quarter inventory targets in June without further discounts for export business.

Bids are already being discussed in the low 30s cpp railcar FOB Houston, but suppliers have so far shown no inclination to accept those prices. 

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-- David Barry, david@petrochemwire.com  

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Propylene inventories drop for fifth week

 

HOUSTON, June 12, 2019 (OPIS PCW)--US nonfuel use propylene inventories trickled lower by 15,000 bbls (-0.3%) last week to 4.869 million bbls, the EIA said today. It was the fifth consecutive inventory draw, and propylene stocks have fallen in ten of the past 12 weeks. Propylene inventories are now only 539,000 bbls (12.5%) higher than their 52-week average of 4.33 million bbls. Meanwhile, US Gulf refinery utilization was off 0.2 percentage point at 94.2%, which is above the 5-year average for this time of year. 

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-- David Barry, david@petrochemwire.com  

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US Spot Ethylene Hits New Low as Bearish Fundamentals Converge

June 4, 2019

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U.S. spot ethylene traded down to new lows on Monday, with a deal in Mont Belvieu at 11.75cts/lb. and Louisiana ethylene trading down to 12.125cts/lb. in the Choctaw hub.

These prices are the lowest recorded by OPIS PetroChem Wire; this data history dates back to July 2007.

The lows are not entirely surprising, as spot ethylene has steadily been trading down from 18cts/lb. at the start of the year. Driving the trend were the classic fundamentals of any bear market: increasing supply, decreasing demand and falling upstream prices.

As more ethylene and downstream capacity comes online, more power comes into the consumer side, which naturally leads to lower pricing. A few other factors have added to the bearish pall hanging over ethylene in recent months:

  • Ebbing downstream export demand. The U.S.-China trade situation has resulted in fewer exports of finished goods to the U.S. from China, and by extension, lower demand in China for U.S. polyethylene resin. While polyethylene producers report that domestic demand has been decent, 2.37 million mt/yr (5.22 million lbs./yr) of new capacity is scheduled to start up in 2H 2019. Export requests have slowed, and prices are falling worldwide. Facing the new supply hitting the market and holding onto material that was earmarked for export has created a nervous atmosphere in the plastics markets.
  • Domestic demand from construction stemmed by weather. Heavy rains, frequent storms and flooding have jammed up construction projects throughout the U.S. during its busiest season. Plastic pipe markets (PVC and polyethylene) in particular have been hit the hardest, as wet soil results in delays in not just construction activity but also in agricultural planting schedules. Pipe manufacturers report slowdowns in the municipal, conduit and irrigation pipe demand.
  • Slower demand from flooring, window, door, siding and decking sectors. Producers of these products report that changes in U.S. income tax returns have resulted in a drop of home improvement projects, and a need for their products during 2Q when most citizens typically receive (and spend) their tax returns.
  • Low feedstocks pricing. May was a brutal month for heavier NGLs, as propane slipped below 50cts/gal and butane dropped below 60cts/gal. Ethane has managed to stay above 20cts/gal. Ethylene production costs based on ethane as a feedstock were slightly above break-even levels (relative to spot ethylene) and were under water using propane or butane.

Propylene prices were also falling Monday, but were still significantly higher than ethylene and they remained attractive co-product markets. Polymer-grade propylene was offered down to 34.25cts/lb., 2cts/lb. below where it traded on Friday, but bids have not come above 33cts/lb. With propane in the mid-to-upper 40s cents per gallon range, ethylene at 11.75cts/lb. and refinery-grade propylene at 24cts/lb., PGP margins were relatively healthy using any production method (PDH, metathesis, splitting).

Butadiene pricing was also relatively strong, with June contracts set at 46cts/lb.

– Kathy Hall, kathy@petrochemwire.com  

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