US spot ethylene prices are expected to give back some recent gains during the first quarter as a recent surge in export demand is poised to wane with Asia crackers returning to normal operations.
US spot ethylene surged by 90pc, or 16¢/lb, between 10 November and the end of December after LG Chem's 1.16mn t/yr naphtha cracker in Yeosu, South Korea, shut down following a fire. Six crackers totaling 5mn-5.5mn t/yr of ethylene production in Asia are slated to return to service between now and the end of the first quarter of 2021. Ethylene prices in northeast Asia may give back much or all of their 27pc gain since the start of November. The landed CFR price has been around $975/t following the LG outage and saw no decrease when an extended turnaround that began in March at Lotte Chemical's 1.1mn t/yr cracker in Daesan, South Korea, ended on 8 December.
Strong domestic and export demand pushed ethylene at Mont Belvieu, Texas to 33.75¢/lb by the end of December, higher than the gains seen in the aftermath of Hurricane Harvey in August 2017 to levels last seen in mid-February 2017.
The November-December ethylene price run-up eclipsed a 68pc increase in August that was largely driven by Hurricane Laura's direct hit on Lake Charles, Louisiana, in the last days of that month. Hurricane Laura, the fifth strongest hurricane to make landfall in US history, took out power and production in Lake Charles, the epicenter of 2019's cracker buildout, taking roughly 15-20pc of US ethylene production offline for more than a month.As a result, US ethylene inventories declined by 21pc in the third quarter from the preceding three months, according to the American Fuel & Petrochemical Manufacturers (AFPM), as production could not keep pace with consumption.
Second half 2020 gains in US ethylene followed a six-year low in April, with deals reported as low as 8¢/lb, alongside a steep fall in crude as transportation demand crashed due to shutdowns related to Covid-19 mitigation measures. The pandemic also caused maintenance delays in the US. Formosa's 771,000 t/yr cracker in Point Comfort, Texas, which went down for work 1 April, may not return to service until the end of the first quarter 2021. The large 1.25mn t/yr cracker at the facility went down unexpectedly on 19 December and may not return to service until mid-January. When both units return to service, the site scheduled to begin a turnaround on the 862,000 t/yr mixed-feed cracker.
Other US Gulf coast maintenance work in the first half of 2021 may keep prices from falling to the 17.75¢/lb lows seen in early November. Two turnarounds in Lake Charles for 676,000 t/yr and 654,000 t/yr crackers are scheduled for the first and second quarters of 2021, respectively. An additional turnaround in Sweeny, Texas, for a 635,000 t/yr cracker is expected in the first quarter.
In addition, Enterprise Products Partners is gearing up to boost exports from its ethylene export terminal at Morgan's Point, Texas. The company will complete work this month on a 66mn lb ethylene storage tankthat will boost loading at the terminal to a maximum rate of 2.2mn lb/hr, and allow the terminal to reach its full 1mn t/yr nameplate capacity. With Asian demand falling, however, terminal throughput may lessen in the first quarter.
By Michael Camarda
