olefin

Falling crude oil prices and other factors have crushed margins in the steam cracker/olefin unit segment of the petrochemical industry.   Margins per pound of ethylene have declined from more than 60 c/lb in October 2014 to less than 20 c/lb today (November 2015) for NGL feedstocks, including ethane.  We expect some petrochemical companies might be feeling a chill in the air.  That’s because five new Gulf Coast world scale steam crackers and a couple of smaller units are under construction or being developed to add still another 20 billion/lbs of capacity by the end of 2018.    In today’s blog, we assess NGL feedstock margin declines.

In just over a month, purity ethane prices in Mont Belvieu are off 41%, falling from 50 cnts/gal on 4/30 to 29 cnts/gal on Friday, 6/8.  During the same period, non-TET propane was down 35% from 116 cnts/gal to 75 cnts/gal (see left graph, below).  Last week when we looked at petrochemical feedstock economics, propane was the preferred feedstock for the first time in years.  But a couple of days later that relationship flipped back to ethane.   At first glance, that seems strange.  Both ethane and propane increased during the first half of the week, then came back off (see right graph).  But feedstock economics went from favoring propane by more than a nickel per pound of ethylene to favoring ethane by just over a penny on Friday.  To understand how and why this shift happened we’ll need to break out the spreadsheets again.