S&P Global: The advantage of raw materials helps the recovery of U.S. ethylene profit margin

The short-term outlook report for the North American market released recently by analysts from S&P Global Commodity Insight said that the U.S. ethylene profit margin will recover in the first quarter of 2023 due to the impact of the fall in the price of ethane.

S&P Global said that the agency expects the US natural gas condensate (NGL) production to increase by about 530000 barrels per day or 9% in 2022. Among them, ethane accounts for more than half of the new increment, which is recovered from natural gas and can be used as raw material for the new ethane-based cracking unit and exported to the outside world.

According to the data of S&P Global, in 2022, three sets of ethane feed steam cracking units in the United States will be put into operation: the 1.8 million t/a unit jointly built by ExxonMobil and SABIC, the 1 million t/a unit of Total Energy and Beipoter Polymer, a joint venture of Nordic chemical industry, and the 1.5 million t/a unit of Shell. In 2023, no new steam cracking project will be put into operation, but Nova Chemicals will expand its capacity by 400000 tons/year, Ineos will expand its capacity by 240000 tons/year, and Shintech, the U.S. PVC producer, will increase its capacity by 170000 tons/year.

S&P Global said that ethane is also the preferred raw material in the world, and the export of ethane from the United States by sea is still strong. In the third quarter of 2022, US ethane exports increased by 26% year-on-year. Among them, China is the main destination, accounting for 43%; The second is Europe, accounting for 29%; 22% in India; Mexico is 5%. S&P Global Commodity Insight predicts that the total domestic and export demand for ethane in the United States will increase by 9% to 2.5 million barrels per day in 2023. In 2024, the demand for ethane in the United States is expected to remain flat and still have the potential to rise, mainly depending on the global economic trend.

However, with the increasing demand for liquefied petroleum gas (LPG) exports, the US NGL production will continue to rise. Therefore, the supply of ethane in the United States will exceed the demand, resulting in an increase in the amount of ethane discarded from an average of 821000 barrels/day in 2022 to 939000 barrels/day in 2023, or 1 million barrels/day in 2024. Strong LPG prices will increase the margin of natural gas processing, thus reducing the pressure on ethane prices.