There has been a dramatic shift in cracker feedstocks in the USA over the past 2 years, as crude oil prices have risen. Many US producers have been able to switch to ethane feed, and as a result have become some of the lowest-cost ethylene producers in the world.
As the chart* shows:
• In 2006, 47% of US ethylene came from ethane (blue column) and 31% from naphtha/liquid feedstock (light green)
• By Q4 2010, this had become 65% from ethane, and 16% from liquids
This has enabled the USA to become a major polyethylene and PVC exporter over the past two years, helping to compensate for the downturn in domestic markets.
Equally, the NPRA data on which the chart is based, suggests that those crackers still using liquid feedstocks have shifted towards gas oil, to maximise propylene and butadiene yields. Prices for these products have risen above ethylene’s for the first time in history, as the blog discussed last July in its major series on olefin market developments.
Will this nirvana continue? Clearly new investments will be needed if ethane usage is to increase further. But would these still be attractive if the WTI/natural gas ratio returns to more normal levels? And where will the ethylene go, now China is reducing its US imports?
Its been a truly fantastic 2 years. But the blog somehow doubts that today’s boom can continue indefinitely.
*Thanks to the hardworking experts in the ICIS Intelligence team, and the blog’s IeC colleague Bob Townsend, for the above chart, based on NPRA data