Pessimism in the Asia ethylene market is a bad sign for ethylene vs. other US monomers. Those in the US with ethylene surpluses may need to fight a bit harder to find homes for the excess product in the US. We have not focused on the cost curve for a while as markets have been tight and global costs have not been an influence in the market for some time. The US has plenty of dry powder, in that export prices can fall significantly before they approach ethane-based costs, and can fall below production costs outside the US – especially in Asia – and still generate a margin for the US sellers. But that would mean more downside for US spot pricing and it may be enough to create some surpluses and some downward pressure on US derivative pricing. The caveat, of course, is that we had the same setup last year, albeit with less new capacity in Asia, and the summer hurricane season quickly wiped away any US surplus. A better understanding of the current cost curve and relative regional pricing can be found in our Weekly from Monday.
Source: EIA, Bloomberg, C-MACC Analysis, May 2021