Ethylene is used in the manufacture of polyethylene (PE), polyester, polyvinyl chloride (PVC), polystyrene (PS) and ethylene oxide (EO), as well as fibres and other organic chemicals. PE accounts for 60% of global ethylene demand.
The ongoing technical issues with the Evangeline Pipeline have created an imbalance in Texas and Louisiana ethylene. Supply is is long in Texas and short in Louisiana, and several downstream units in Louisiana have not been able to receive ethylene from their preferred sources.
Additionally, a major Louisiana cracker – that of Williams Companies in Geismar – remains down because of an explosion in April 2013.
The long ethylene supply in Texas, as well as mostly steady demand in the US and cheap feedstock costs at the end of 2013, have pushed US ethylene inventories higher than normal.
According to the American Fuel & Petrochemical Manufacturers (AFPM), US ethylene inventories ended the fourth quarter of 2013 at 1.6bn lb, up from inventory levels of 1.2bn lb for the fourth quarter of 2012.
Inventory levels have dropped somewhat in 2014, but several downstream plant production issues as well as steady but slow growth in the US economy have prevented a steep drawdown.
US January ethylene contracts settled at 50.25 cents/lb ($1,108/tonne), up by 2.00 cents/lb from the December settlement.
Much of the increase stemmed from feedstock ethane prices soaring at the start of 2014, owing to cold weather in much of the US creating strong demand for ethane in heating uses.
The settlement was the highest since the April 2012 settlement of 55.25 cents/lb.
US ethylene spot prices have been steadily falling in 2014 and have shed 12% since the start of the year.
Sources expect ethylene prices to stabilise in March as supply tightens because of several cracker turnarounds, but demand is soft because of several downstream plant issues.
Commercial production of ethylene is done by steam cracking hydrocarbon feedstocks. Ethane and propane are the primary feedstocks in the US.
US ethylene capacity could grow by as much as 51% in the next few years, driven by a boom in shale gas production that is expected to make the US one of the most competitive ethylene producers in the world. The capacity additions will come through new world-scale crackers, as well as restarts, expansions and debottlenecks.
There are now plans announced for a total of 10 new ethane crackers in the US – eight on the US Gulf Coast, and two in the northeast US. This represents around 12.2m tonnes/year of ethylene capacity, according to an analysis by ICIS.
The latest three of the 10 planned new crackers have been announced across the span of three months in late 2013 to early 2014.
These include a 1.0m tonne/year cracker in Louisiana by Axiall/Lotte Chemical; another 1.2m tonne/year cracker by Formosa in Louisiana in addition to its previously announced Texas cracker; and one of undisclosed capacity in Wood County, West Virginia, by Brazilian industrial conglomerate Odebrecht.
Additional reporting by Joseph Chang