US ethane cracking margins have fallen to the lowest in 10 months on rising ethane cash costs and falling spot ethylene prices at Mont Belvieu, Texas, according to an Argus generic model.
Ethane cracking margins on Wednesday fell to 10.5¢/lb, the lowest level since May 2024.
Margins have steadily narrowed from a peak of 24.75¢/lb two months ago, when a freeze took several US Gulf coast crackers off line and spiked ethylene prices to 35.25¢/lb in a trade at the Enterprise Products Partners (EPC) system at Mont Belvieu.
The decline in cash margins largely follows falling domestic ethylene spot prices as US crackers have incrementally restarted and ramped up production since mid-January. US spot EPC ethylene traded Wednesday at 24.75¢/lb, the first trade below 25¢/lb since late November.
The more than 10¢/lb decline in ethylene spot prices does not fully account for eroding ethane cracking margins. Ethane costs have risen by more than a third through February and into March, hitting an 18-month high last week of 31.1875¢/USG. Higher ethane costs have largely followed higher natural gas prices at the benchmark Henry Hub, which hit a two-year high at $4.491/mmBtu on 10 March stemming from tightening US gas inventories. Natural gas prices serve as a price floor for ethane because it is separated from raw natural gas during processing.
The 60pc drop in ethane cracking margins over the past two months is unlikely to affect ethane-based ethylene production, as margins of at least 4-5¢/lb are generally still profitable for cracker operators.
US ethane cracking margins in 2024 averaged 14-15¢/lb, according to Argus data. Ethane structurally remains the most advantaged feedstock on the US Gulf coast and was last surpassed briefly by a competing feedstock more than 18 months ago. Propane cracking margins are currently negative and the butane cracking margin has ranged from 3.5-8¢/lb this month.
