Price and market trends: Deutsche Bank expects US ethylene margins to fall in the second half

14 June 2013 09:29  [Source: ICB]

US ethylene margins have likely hit their peak for the year. But long term, the up-cycle will be the strongest in history

US ethylene margins should be strong in the long term, but 2013 margins may have reached their peak, according to Deutsche Bank analyst David Begleiter.

2013 ethylene margins have likely hit their highest unless a strong global economic recovery occurs, said the analyst.

US ethylene margins are expected to fall to the 25 cents/lb ($551/tonne; €419/tonne) level in the second half of 2013.

SOFT DEMAND
The fall will mostly be spurred by lower spot ethylene prices because of softer demand from the polyethylene (PE) and polyvinyl chloride (PVC) markets, Begleiter said. US ethylene margins have been in the 45-50 cents/lb range in the past four weeks ended 7 June, as assessed by ICIS.

The bank said that its ­projections for strong long-term ethylene margins are based on expected long supply and steady demand in the feedstock ethane market.

This balance favouring ethylene producers is expected to last through 2016 at the least. "We ­believe US ethylene is in the ­middle innings of what will be the ­longest and strongest cycle in its history.

Underpinning the duration of this cycle will be a long ethane supply/demand balance starting in 2013-2014 and delays in constructing new ethylene capacity (permitting, E&C bottlenecks)," said Begleiter.

Major US ethylene producers include Chevron Phillips Chemical, ExxonMobil, INEOS, LyondellBasell and Shell Chemical. Major buyers include Axiall, Dow Chemical, Occidental Chemical and Total.


By: John Dietrich
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