By Malini Hariharan
The Asian olefin and polyolefin markets have softened in recent weeks but the US market remains on a different track, as seen in these reports filed by my colleagues on ICIS news.
Ethylene prices are still firm on tight supplies. Spot ethylene for March/April was at 61-63 cents/lb, up from 42.5-43.0 in January. Availability has been hit as a result of a number of unexpected cracker shutdowns which started in early January after Texas experienced unusually cold weather.
The high prices mean that US PE exports are likely to drop in the coming months. A trader estimated that ethylene would have to drop to 40cents/lb for PE to be competitive in the export market.
Ethylene prices are expected to correct in the coming months as the supply situation is easing with crackers resuming operations. But one producer was not too worried and said that margins would be at acceptable levels even if ethylene dropped by 20cents/lb as ethane prices were also weakening, said one producer.
Many of the US companies including Shell, have prepared themselves for an extended period of low ethane prices. An executive from the company said that investments made at its crackers in the US over the last few years have given Shell the capability to crack 70% gas feedstock. The earlier configuration was 70-75% liquid cracking.
The shift to a lighter feedstock slate has been one of the factors supporting a surge in propylene prices. The situation has also been aggravated by unexpected cracker shutdowns and a decline in US operating rates due to weak demand for fuels.
Around two-thirds of US propylene now comes from refineries, due to declining output from crackers.
Meanwhile, Nova expected the second quarter to remain strong with continued growth in PE demand. And although the US-Asia arbitrage window has closed, Nova has been able to export from its Joffre operations in Canada because of freight advantage. PE is put in bulk rail containers and sent to Vancouver port from where it is shipped to Asia.