AFPM ’18: US ethylene prices falling on strong production, limited demand

HOUSTON (ICIS)–US ethylene spot prices dropped to a nine-year low in March, and contract prices have been trending lower, as production is bolstered by new crackers and demand is hampered by downstream outages, heading into this year’s International Petrochemical Conference (IPC).

Production had normalised in late 2017 after Hurricane Harvey, with the final related outages resolved in early December. Since then, there have been few outages to weigh on production.

Aside from several short-term outages, a cracker was offline from late December to late February after a fire and another began a turnaround in early March. Despite those outages, new crackers have helped keep ethylene production rates strong.

Dow Chemical had started up a 1.5m tonne/year cracker at its complex in Freeport, Texas, in September. Market sources have said it reached full operating rates by January.

Chevron Phillips Chemical (CP Chem) started up a 1.5m tonne/year cracker at its Cedar Bayou complex in Baytown, Texas in March. The cracker is expected to ramp up to full capacity during the second quarter.

The ethylene market expects production to expand further with two more cracker projects expected to start up in the first half of the year and several more in the second half of the year.

Company	Location	Capacity	Timing
Occidental/Mexichem	Ingleside, Texas	544,000 tonnes/year	Started Q1 2017
Dow Chemical	Freeport, Texas	1.5m tonnes/year	Started September 2017
Chevron Phillips Chemical*	Cedar Bayou, Texas	1.5m tonnes/year	Started March 2018
ExxonMobil*	Baytown, Texas	1.5m tonnes/year	Q2 2018
Indorama*	Lake Charles, Louisiana	440,000 tonnes/year (restart)	H1 2018
Shintech	Plaquemine, Louisiana	500,000 tonnes/year	2018
Sasol	Lake Charles, Louisiana	1.5m tonnes/year	H2 2018
Formosa Plastics	Point Comfort, Texas	1.25m tonnes/year	Q4 2018
Lotte-Westlake	St Charles, Louisiana	1m tonnes/year	2019

* Previously expected in late 2017

Meanwhile, demand has been lacklustre due to downstream production issues, notably in the polyethylene (PE) market which is the largest consumer of US ethylene.

Several new PE plants had started up in late 2017, but some continue to struggle to reach full operating rates. Existing PE plants have had production issues as well in the first quarter of the year. By late February, 3m tonnes of PE capacity was estimated to be offline or disrupted.

Amid the limited consumption rates, ethylene spot prices began to fall in January. Ethylene spot prices were assessed at 16.0-16.5 cents/lb ($353-364/tonne) for the week ended on Friday.

Contract prices had been trending generally lower since a Hurricane Harvey spike in September to 35.25 cents/lb. February contract prices settled at 30 cents/lb.

While the ethylene market may become more balanced as downstream outages are resolved and as further downstream projects are expected to come online, supply remains lengthy in March.

Major US ethylene producers include Chevron Phillips Chemical, DowDuPont, ExxonMobil, INEOS Olefins & Polymers, LyondellBasell and Shell Chemical.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 25-27 March in San Antonio, Texas.