The Baystar polyethylene start-up date is consistent with the guidance that the company has been providing for a while, but it still leaves the venture with an ethylene surplus until that time and while the ethylene has been placed, according to the company, the ethylene that it has displaced will likely keep some downward pressure on US ethylene pricing until the polymer plant starts up (all things being equal). Even when the polymer plant starts, the US is expected to have a net ethylene surplus and we would expect exports to continue and prices to reflect levels to make the exports possible.
While propylene currently looks like it lives on a different planet to ethylene in the US, the forward curve (in the exhibit below and covered in more detail in today's daily) would suggest that expectations are for pricing to fall from here. Higher refining rates, as well as PDH restarts, should help, but with propane pricing where it is there will likely be no helps from increased propane cracking. The competitive disadvantage that US consumers of propylene face versus their counterparts in Asia is extreme, but it is unclear how the arbitrage can be exploited today given very strong domestic demand in the US and very high freight costs from Asia. The lower monomer and polymer costs in Asia may help offset some of the very high freight rates that we discussed in yesterday's report.
Source: Bloomberg, C-MACC Analysis, June 2021