Ethylene production profit is low innovation NGL is the improvement of raw material economy
Some cracking producers in the United States are replacing ethane as a cracking feedstock with natural gas liquids containing propane and butane. There are two reasons for the cracking of raw materials. First, ethylene prices have fallen to historical lows and ethane costs have increased. Ethylene production profit from ethane as a raw material hit a record low; second, the lower NGL price and the firm price of propylene and butadiene made the economic efficiency of cracking with NGL as a raw material significantly improved.
Low ethylene price innovation
Since the end of 2017, the United States has newly produced about 3 million tons/year of ethylene capacity and about 3.5 million tons/year of polyethylene (PE) capacity. The new cracker is in good condition, but some new PE units are running. Failure, failed to reach full capacity.
ExxonMobil's new ethylene cracker in Bay City, Texas, is in trial operation and is expected to begin production this summer. In Dorama's 440,000 tonne/year idle cracker in Lake Charles, Louisiana, has also been upgraded. It is scheduled to go into production in July and is expected to reach full capacity in the third quarter.
Since the new ethylene production has exceeded the new downstream demand, the US ethylene spot price has fallen to a historical low. At the beginning of May this year, the US ethylene spot price fell to 12~12.5 cents/lb, which has been since January 1999. The lowest point. At the end of May and early June, the spot price of ethylene in the United States showed a short-term rebound due to the rebound in the operating rate of newly-produced PE devices. However, due to the impact of more new ethylene production capacity, the current US ethylene spot price has once again fallen back to history. Near the low point.
Profit is severely squeezed
According to market participants, the profit of ethylene production in the United States has been severely squeezed due to the rising cost of ethane raw materials and the continuous decline in ethylene spot prices. The profit margin of crackers for the production of spot ethylene from ethane has started in January 2000. The lowest point since the record. In late May of this year, the ethylene production profit margin rebounded slightly due to the rebound in ethylene spot prices. However, in June, due to the fall in ethylene spot prices, the ethylene production profit margin fell again.
An NGL broker on the US Gulf Coast said that ethylene production capacity must be rationalized, otherwise producers will face lower profit margins in the next two years. This low-margin situation may continue until 2020, with PE The large production capacity of new capacity and the increase in exports will start to rebound.
A set of ethane crackers from Chevron Phillips Chemical Company was forced to idle in mid-May this year due to a record low in ethylene production profit.
Economic improvement of heavy raw material cracking
ICIS senior consultant James Ray said that while ethylene prices continue to fall and the prices of by-products such as propylene and butadiene remain firm, there may be more and more crackers turning to cracking heavy materials such as NGL. Reduce ethylene production, while increasing the production of by-products such as propylene and butadiene.
Recently, as the price of NGL has fallen, the economics of crackers using propane and butane have been significantly improved. Compared to cracking ethane, cracking propane and butane produces less ethylene, while propylene and butadiene. The output of by-products is higher.
The prices of by-products such as propylene and butadiene remain strong, mainly due to the fact that most of the new cracking units in the United States use ethane as a feedstock, and the supply of propylene and butadiene is still balanced in the case of excess ethylene supply. Ray said that Most of the old crackers with new ethane cracking capacity can be cracked with heavy feedstocks, while new crackers are usually made entirely from ethane, because adding infrastructure that can handle by-products such as propylene and butadiene can cost It is expensive.
For cracker operators, it is more attractive to increase the production of by-products such as propylene and butadiene while reducing ethylene production or cracking propane and butane as feedstock. The source said that the production cost of propane feedstock is still higher than that of B. Alkane feedstock, but the production cost of butane feedstock is slightly lower than the cost of ethane feedstock.