OUTLOOK '18: US ethylene market to continue feeling effects of Harvey

03 January 2018 15:00 Source:ICIS News

HOUSTON (ICIS)--US ethylene supplies will continue to be constrained into early 2018 due to Hurricane Harvey delaying the start-up of several cracker projects.

Harvey made landfall along the US Gulf Coast in late August and remained in the region for several days with historic levels of rain. Multiple olefins units along the Texas and Louisiana coasts were taken offline due to effects from the hurricane. While many units restarted in the weeks after the hurricane, several outages continued into the fourth quarter.

Ethylene prices rose to a post-hurricane high of 31.50-32.25 cents/lb for spot and 35.25 for contracts in September, but began moderating as hurricane-related outages resolved. Supply also was bolstered in September as a new olefin unit started-up at Dow Chemical's complex in Freeport, Texas.

However, the start-up of the other three cracker projects expected in late 2017 were delayed into early 2018, with most companies citing effects of Hurricane Harvey as a factor in the changed schedule.

Ethylene project Capacity Timing
Dow Chemical
Freeport, Texas
1.5m tonnes/year Started up
ExxonMobil
Baytown, Texas
1.5m tonnes/year Expected early 2018
Previously expected end 2017
Chevron Phillips Chemical
Cedar Bayou, Texas
1.5m tonnes/year Expected Q1 2018
Previously expected end 2017
Indorama
Lake Charles, Louisiana
370,000 tonnes/year
(restart of idled unit)
Expected early 2018
Previously expected end 2017

Despite the outages and delayed projects, disruptions from Hurricane Harvey did not push ethylene prices above their 2017 high point. In April 2017, spot prices had risen to 36.00-38.00 cents/lb and contract prices had risen to 35.75 cents/lb amid a combination of cracker outages and strong downstream consumption.

Increasing consumption is set to be a contributing factor to tight ethylene supply, especially in the early part of 2018.

Several downstream plants started-up in late 2017, including an ExxonMobil polyethylene (PE) unit in Mont Belvieu, Texas; a Dow Chemical unit in Freeport, Texas; a Chevron Phillips Chemical unit in Old Ocean, Texas; and an INEOS Sasol unit in LaPorte, Texas.

With the new downstream capacity ramping up and with the delays to ethylene capacity increases, ethylene supply could become quite tight in early 2018.

Farther into the year, ethylene supply could become balanced to long as the delayed ethylene projects start up and as this first wave of cracker expansions is planned to continue into 2018.

Four more projects had been planned to start up throughout the year:

Company Location Capacity Timing
Formosa Plastics Point Comfort, Texas 1.25m tonnes/year Early 2018
Shintech Plaquemine, Louisiana 500,000 tonnes/year Early 2018
Sasol Lake Charles, Louisiana 1.5m tonnes/year H2 2018
Lotte-Westlake St Charles, Louisiana 1m tonnes/year H2 2018

Major US ethylene producers include Chevron Phillips Chemical, Dow Chemical, ExxonMobil, INEOS, LyondellBasell, NOVA Chemical and Shell Chemical.

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By Jessie Waldheim