We saw the stable to downward trends in both US ethylene and propylene spot prices reverse at the end of 2020, in part because of recovering demand post the initial wave of COVID, but also because of storm-related production constraints in October and early November. The weaker spot markets for both ethylene and propylene today reflect much stronger production for propylene (all PDH capacity running) and Hurricane Ida-related upsets that have left the monomer markets less badly impacted than derivatives. Something similar happened in 2020, especially for ethylene, but the backlog of derivative demand cause a step up in ethylene consumption when everything restarted. This could happen again, and we are earlier in the Hurricane season. See today's daily report for more.
Source: Bloomberg, C-MACC Analysis, September 2021
Propylene derivatives focused in the auto segment may be seeing some focused weakness, but if so, it is not apparent in spot polypropylene pricing yet. Otherwise, despite relatively high prices (versus costs and versus other regions), there may still be some dilemma for propylene and ethylene producers around whether to sell surpluses today or store them. This time last year the right move would have been to hold on to surpluses. Ethylene has 5-10 cents to fall to get export interest but propylene has much more downside if the surpluses persist as polymer grade pricing is a long way above PDH production costs and refinery-based upgrade costs.
Source: Bloomberg, C-MACC Analysis, September 2021