US producers exposed to cheap feedstocks to post strong Q3s: bank

17 October 2013 18:37  [Source: ICIS news]

HOUSTON (ICIS)--US chemical companies with the greatest exposure to cheap natural gas liquid (NGL) feedstocks will post the strongest Q3 financial results in the coming days, a global investment bank said in a research note on Thursday.

Deutsche Bank said producers such as LyondellBasell and Westlake Chemical are poised to have excellent earnings based on their use of cheap ethane, which has fallen in price by 10% quarter on quarter and 27% year on year.

Increased fractionation capacity amid the continuing US shale boom has led to the drop in ethane prices and has supported healthy ethylene margins.

Ethylene margins most recently were assessed by the ICIS at 36.57 cents/lb ($806/tonne, €596/tonne). The margins are at a 14-month low due to ethylene spot prices falling on long supply in Texas and declining demand domestically.

Ethylene margins also fell as feedstock ethane costs for the week ended 11 October rose to 11.06 cents/lb from 10.99 cents/lb a week ago.

Still, margins are advantaged compared with those facing producers in Asia and Europe, Deutsche Bank said, adding that US ethane prices should continue to be “well below historical levels” such as Dow Chemical.

The bank said it expects most US chemical producers to report Q3 results in-line with analysts’ projections thanks to “continued modest growth in the US and low feedstock/raw material costs”.

Additional reporting by John Dietrich

($1 = €0.74)

By: Jeremy Pafford
+1 713 525 2653

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