The relative strength in US propane versus ethane is something we have talked about before, with the strong export pull on propane, pushing prices higher, despite equally strong demand for ethane in US ethylene units and for export. The projects to consume propane coming online in the next 12 months overwhelm the projects to consume ethane in our estimate and consequently, we believe that the delta (in chart below) will remain high and may widen further. On a cost basis, this could put US propylene and a distinct disadvantage to US ethylene and at the margin might help ethylene derivative demand relative to propylene derivative demand – most likely in paint additives, but also in some polymers where polypropylene can be substituted with other materials – it may provide a bit of a lifeline for polystyrene if the polystyrene recycling initiatives gain traction. See our daily report for more.
USGC propane remains elevated relative to USGC ethane. With this in mind, an elevated ethylene cracker co-product market (most notable propylene) has kept the margin profile for US ethylene cracker operators closer than the basic price spread suggests. We foresee propane staying elevated relative to USGC propane YoY through 2H21.
Source: Bloomberg, C-MACC Analysis, June 2021