Feedstock margins for LPG cracking (propane and normal butane) have sunk deeper into negative territory to start the new year approaching natural gasoline as the least economical cracker feedstock. As shown on the left-hand chart below, ethylene margins for propane cracking have declined from around breakeven in early December to about minus 8 c/lb as of January 22. Butane cracking economics have also weakened going from approximately minus 5 c/lb to minus 9 c/lb over the same period. Meanwhile, ethane steam cracker margins have been relatively steady at about 10 c/lb, almost 20 c/lb above LPG feed. Margins for propane cracking are currently 18.4 c/lb below ethane and 2.2 c/lb better than natural gasoline feed. Butane is slightly worse than propane with margins 19.6 c/lb below ethane and just 0.9 c/lb above natural gasoline. So, what is behind the drop in propane and butane margins over the last couple of months? As shown on the right-hand chart below, the main culprit has been stronger propane and butane prices. Propane prices (Non-TET) have soared by ~19 c/gal, or 26%, to 90 c/gal since early December while normal butane (Non-TET) has increased by about 12 c/gal, or 12%, to 111.5 c/gal currently. 10 c/lb ethane margins may not seem great, but they are much better than the rest of the pack.
Featured Articles
- Analyst Insight
Normal Butane Overtakes Ethane As Most Economical Cracker Feedstock
U.S. steam cracker margins for normal butane (butane) have rallied in early October overtaking ethane for the top spot as the most economical feedstock. Ethylene margins for butane cracking have increased from ~2 c/lb in early September to nearly 15 c/lb as of October 9th.
- Analyst Insight
Ethane Steam Cracker Margins Weaken
Ethane cracking margins have declined from ~19 c/lb in late March to 7 c/lb as of June 26 while economics for normal butane have held up much better with a margin of about 13 c/lb currently.
- Blog
God Only Knows - Why Did the Normal Butane Market Go On a Holiday Bender?
The normal butane market was anything but normal the past few weeks. All’s back to square one now, but in the last week of 2016 the price for normal butane spiked to more than $1.20/gal from only $0.73/gal in November. The differential between isobutane and normal butane plummeted into record-shattering negative territory. And the margin from cracking normal butane to make ethylene and other products fell off the chart—literally, our PowerPoints had to be reworked to show how much the margin had fallen. What the heck went on there? Today, we discuss the recent upheaval, what may have caused it, and why things snapped back to normal so quickly.
