US ethylene margins may rise on higher oil – analyst

HOUSTON (ICIS)–Higher crude oil prices mixed with flat ethane should raise US ethylene margins and methanol prices in 2017, an analyst said on Tuesday.

Alembic Global Advisors head of research Hassan Ahmed said that higher oil and ethylene prices would then cause methanol-to-olefins (MTO) facilities in China to come online, boosting the demand for methanol.

Titanium dioxide (TiO2) and chlor-alkali should also rally in 2017, Ahmed said.

The report noted that methanol was sensitive to fuel prices, moving $110 per tonne for every 60 cent move in a gallon of gasoline. Given this, Ahmed said, if oil prices were to remain at current levels, methanol prices could rise by approximately $160 per tonne year on year in 2017.

The styrene market, which the report described as “in the doldrums since the mid 1990s”, could improve, in global utilisation rates at least, given a combination of consolidation and capacity rationalisation that is already underway.

Ahmed predicted 2% in global demand growth for styrene through 2019 after a utilisation rate of 90% by the end of 2017. A rate higher than 90% could indicate a peak in the styrene cycle, he added.

In terms of company impact, share prices will likely be more affected by event-driven catalysts than individual chemical commodity prices. The report listed Linde’s potential merger with Praxair, Huntsman’s pigment business spinoff and Dow Chemical’s proposed merger with DuPont as examples.