Page 183 - CW E-Magazine (2-4-2024)

Special Report Special Report

US petrochemicals exports to become growing to average $2.45/MMBtu in 2024 with lot of logic that says [it will be] in that LyondellBasell expects US PE
prices moving up in H2 following over-
$2.50-3.50/MMBtu range as you look prices to remain fi rm in Q1 with mod-
force, but geopolitical risks loom supply in H1 from a warmer winter, and out say fi ve years, just based on supply/ est improvements in domestic demand
$3.30/MMBtu in 2025. Meanwhile, demand balances, and the low cost and and ongoing strength in export markets.
Brent crude oil is expected to trade bet- the speed in which we can get capacity Ethane and energy feedstock costs are
n an era of intensifying global through February versus a year ago, ween $70-90/bbl in 2024. online because of the shale gas,” said also expected to remain favourable,
competition, the US petrochemical with strength likely continuing through JOSEPH CHANG Fitterling at the JPMorgan Industrials providing margin tailwinds.
Iindustry is primed to become a at least H1, according to Harrison Global Editor “The US cost advantage should Conference in mid-March.
growing force as an enviable cost posi- Jacoby, director of PE at CDI. ICIS remain intact, especially if crude stays up Dow’s cracker operating rates in its
tion from shale gas enables it to run at where it is. Even if it drifts to the $70/ “The US has got a great long-term cost-advantaged regions – the US Gulf
high rates and ramp up exports, espe- In February, US PE exports East. Meanwhile, the impact of Panama bbl range, ethane will still be advan- low-cost position, Canada has a great Coast, Canada and Argentina – were
cially in a high crude oil price regime. accounted for 46.9% of total sales Canal restrictions to US PE exports taged,” said Barin Wise, Vice President – long-term low-cost position, and that’s above 90% in Q4 and are expected to
volumes, he pointed out. has been minimal, the analyst pointed Feedstocks and Fuels at CD. what underpins everything we decide continue strong through Q1.
US chemical exports are expected out. to do downstream. That’s the structural
to rebound 3.1% to $170.7-bn in 2024, “Recently we are hearing about “However, that advantage should cost advantage we can build the rest of In February, US PE operating rates
after falling an estimated 7.5% in 2023, very weak PE demand in China cou- ICIS forecasts North America PE decrease as the year unfolds as higher the business on,” he added. were 94.7% on a preliminary basis,
and then accelerate by 5.8% in both 2025 pled with local pricing at or lower exports rising 4.6% in 2024 to around gas prices will increase the cost to CDI’s Jacoby pointed out.
and 2026, according to the American than import pricing, which will cause 11.7-mt with volumes to Europe jump- produce ethylene. High shipping costs US high-density polyethylene
Chemistry Council (ACC). Exports are some headwinds for US exports to the ing 7.8% to around 2.4-mt. eat into the arbitrage, so if shipping (HDPE) spot margins were nearly PVC exports to tail off
projected to represent 27-29% of total region,” said Jacoby. normalizes, that is also advantageous $750/tonne in early March. This com- US PVC exports were exceptio-
US chemical shipments by dollar value LyondellBasell sees continuing strength for US producers,” he added. pares with northeast Asia spot margins, nally strong in December and January,
through 2026. “But Europe’s demand for US in US PE export volumes, bolstered by which have been negative since late accounting for 41% of total sales. How-
exports is helping to offset this. Overall the advantaged oil-to-gas ratio. Wise sees ethane remaining below November 2023 and northwest Europe ever, exports fell to 31% of the total in
The US consistently maintains a US PE exports will remain strong long 20 cents/gal through May, but then spot margins of around $710/tonne, February and are expected to remain
trade surplus in chemicals, with this term because of the US cost advantage “We are beginning to see some moving higher with natural gas prices according to the ICIS Supply and Demand subdued through Q1 on maintenance
expected to jump 28% from $21.1-bn in via the abundance of NGL [natural gas signs of modest improvement. In North and higher feedstock demand. Over the Database. European margins have risen activities, said Kelly Coutu, director of
2024 to $27.1-bn by 2026, according to liquids]-rich shale gas,” he added. America, relatively small disruptions longer term, low US natural gas prices lately as imports from the Middle East PVC at CDI.
the ACC. from Winter Storm Heather in Houston should allow the chemical industry to and Asia via the Red Sea have been
Shipping disruptions in the Red reduced supply across our industry and maintain its structural low-cost posi- disrupted. “The operating rate for Q1 into
US PE exports to continue strong Sea are supporting US exports to tightened markets,” said Peter Vanacker, tion, according to Dow CEO, Jim Fit- Q2 is expected to be in the upper 70%
US polyethylene (PE) exports have Europe, displacing volumes that would CEO of LyondellBasell, at the terling. On a contract basis, US HDPE mar- range, down from the low 80% range in
started the year very strong, up 28% typically be served from the Middle JPMorgan Industrials Conference in gins are over $1,150/tonne, but spot is H2 2023, curtailing volumes offered in
mid-March. “When we look long term, there’s a more indicative of the export market. the export market,” said Coutu.
Other 7.5%
Strong demand for PE in Latin 1,000 “Additionally, exports to Europe
1,000
South & Central America 25.2% America has also helped tighten the US in late Q2 will be met with concerns
800
Asia Pacifi c 14.9% market and support improved pricing, 800 around an early ruling to levy an anti-
he added. The US is a major exporter of 600 dumping duty [ADD] against US
600
PE to Latin America. 400 imports to that region, ahead of the
European Commission completing their
s/tonne
200
Cheap gas tailwind s/tonne 400 full investigation. Expectations are for
200
Exports Natural gas has been exceptio- 0 0 a possible 10-20% duty being rendered
nally cheap in the US at well under $2/ in June,” she added.
-200
MMBtu while crude oil has hovered at -200
relatively high levels above $80/bbl. -400 Along with a potential ADD coming
-400
Europe 20.7% This gives US shale gas-based produ- 14-Jul-23 14-Jul-23 28-Jul-23 28-Jul-23 in June, low polyvinyl chloride (PVC)
Northeast Asia 31.7% cers a huge cost advantage globally, 10-Mar-23 10-Mar-23 24-Mar-23 24-Mar-23 07-Apr-23 07-Apr-23 21-Apr-23 21-Apr-23 05-May-23 05-May-23 19-May-23 19-May-23 02-Jun-23 02-Jun-23 16-Jun-23 16-Jun-23 30-Jun-23 30-Jun-23 11-Aug-23 11-Aug-23 25-Aug-23 25-Aug-23 08-Sep-23 08-Sep-23 22-Sep-23 22-Sep-23 06-Oct-23 06-Oct-23 20-Oct-23 20-Oct-23 03-Nov-23 03-Nov-23 17-Nov-23 17-Nov-23 01-
allowing them to operate at high rates US producers to seek alternate regions
NW Europe
US Gulf Coast
NE Asia
and export at will. NE Asia NW Europe US Gulf Coast for exports.
Fig. 1: North American PE exports forecast, 2024 Fig. 2: Global HDPE spot margins
Source: ICIS Supply & Demand Database. ICIS projects US natural gas prices Source: ICIS Supply & Demand Database. “Latin America will remain a
182 Chemical Weekly April 2, 2024 Chemical Weekly April 2, 2024 183

Contents Index to Advertisers Index to Products Advertised