Market Insights

Market Insights

Podcast: The Olefins Weekly Wrap Up – Episode 119


Podcast by

Pablo Giorgi
Global Olefins

Luka Powell
Financial & Capital Markets

Our podcasts are available on all leading platforms including SoundCloud, Spotify & Apple.

You can also read the transcript of this week’s podcast below.

Luka Powell (00:19):

Welcome to The Olefins Weekly Wrap-Up. Today is Friday, April 21, I’m your host, Luka Powell.

Pablo Giorgi (00:27):

And I am Pablo Giorgi.

Luka Powell (00:30):

And together, as Chemical Market Analytics, we recap the top events moving the ethylene and propylene markets over the past week. The design of this podcast is to complement the content from the North America Light Olefins weekly service, otherwise known as the NALO weekly.

Pablo Giorgi (00:47):

Anything exciting happening this weekend, Luka?

Luka Powell (00:50):

It is Record Store Day, so I’m gonna head out to some independent record stores to add to my collection. Should I keep my eye out for anything?

Pablo Giorgi (01:02):

Wow, lots of good memories. My first record was Somewhere in Time by Iron Maiden in 1986. Did you know that vinyls are made of vinyl? Aka PVC, which is made using ethylene, among other raw materials?

Luka Powell (01:18):

These chemicals really do help build everything we use these days.

Pablo Giorgi (01:24):

Very, very exciting. But you know what hasn’t been that exciting? The energy markets!

WTI prices for May delivery settled at $77.29 per barrel on April 20, down from $82.42 last Thursday. Prices have given back most of the gains after the OPEC voluntary production cuts. The Strategic Petroleum Reserve, or SPR, had another draw of 1.6 million barrels this week, after being reduced by the same amount last week, reportedly to meet previous commitments. Excluding the SPR, commercial crude oil stocks in the US drew 4.5 million barrels, to 466 million barrels at the end of last week. That is 2% above the five-year average.

Meanwhile, refinery utilization in the US increased 0.6% to 90.1%. Henry Hub Natural gas prices settled at $2.25/MMBtu this Thursday, up from $2 last week. Liquefied natural gas, or LNG, cargoes in East Asia averaged $12.56/MMBtu this week, while natural gas for delivery at the Title Transfer Facility, or TTF, in the Netherlands averaged $13.35/MMBtu this week. For comparison, in the same week last year, those prices were $27.16/MMBtu in East Asia and $30.06/MMBtu at TTF.

Luka Powell (03:03):

Moving to NGLS, Mont Belvieu NGLs declined across the board on Thursday in tandem with energy futures, though overall losses were no larger than 1.6% in the most commonly traded products. Mont Belvieu ethane prices settled at 20.81 cents per gallon on Thursday, relatively stable from 21.31 cents per gallon last week.

Propane prices fell this week, moving from 83.75 cents per gallon 80.04 cents per gallon. According to the Energy Information Administration, U.S. Propane exports hit an all-time high of 1.851 million b/d for the week ending April 14. With warmer weather and decreasing domestic demand, U.S. Propane inventories have risen to 50% above last year’s stock level for this time of year. As a result, US domestic prices will be driven by the export alternative to Asia. That does it for energy, now onto ethylene.

Pablo Giorgi (04:06):

The US ethylene spot market was not as active this week with deals totaling 91 million pounds at the Texas and Louisiana hubs. Ethylene prices trended lower this week, closing between 18.75 and 23.13 cents per pound for April delivery. Effective operating rates are estimated to be at around 92 to 93%, up significantly from around 80% in Q4 last year when margins were much lower than now. Inventory levels are now rising this month to above the five-year average as supply returned to the market coupled with higher operating rates.

Export arbitrages from the USGC are marginally open to Asia this week, and wide open to Europe. The export terminals remain full and are operating at maximum rates. Domestic demand for ethylene is improving, mostly for polyethylene, but the resin is destined for the export market. We expect the steady increase in polyethylene exports from the USGC to Asia to continue through the first half of the year.

Additionally, domestic demand for ethylene is expected to improve within the next several months with the startup of the Next Wave Energy Partners’ ethylene-to-alkylate plant and the Bayport Polymers PE plant, both in Pasadena, Texas. The ethylene forecast has changed this week. See the NALO for more information.

Luka Powell (05:27):

The US polymer-grade propylene spot market was very quiet this week, with 5 million pounds transacted in only two deals for April delivery. All PDH units were understood to be operating normally this week. Domestic demand for propylene derivatives remains bearish. Propylene prices have stabilised around the low 40s cents per pound. Producers are not desperate to sell, as inventory levels are still very low. If this price level incentivizes additional demand in the next couple of months, prices should continue to be stable. Otherwise, we can expect lower prices.

The picture for the second half of the year remains dim. In the US Gulf Coast, in July, Enterprise will start-up their PDH 2, with a capacity to produce 750 thousand metric tons of propylene. However, on the other side of the world, in China, 10 other PDHs are planning to start their operations between now and the end of June, with a total capacity of approximately 5.5 million metric tons.

The critical factor deciding how hard these units will operate will be the relative competitiveness of their propane feedstock versus naphtha feed into a stream cracker. It’s all very intriguing, more on that in our subscriber services. The propylene forecast has changed, see the NALO for more information.

Pablo Giorgi (06:55):

And with that, let’s wrap up the Wrap Up.

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Luka Powell (07:36):

Don’T forget to subscribe to our podcast on Soundcloud, Spotify, or wherever you get your podcasts, and give us a like or leave a review if you enjoy it. And if you have questions or want us to cover something more specific, you can send us an email. Until next time.

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