Propylene prices are rising again in the US, in part because of the propane price increase discussed in today's daily, but also because of reduced availability from other sources. These higher prices maintain upward pressure on propylene derivative pricing and we have to question how markets will adapt to much higher propylene and derivative pricing than ethylene and derivatives. There are several areas of potential overlap, where ethylene derivatives could take share from propylene derivatives and if the price deltas remain high and users become convinced that this could be the norm, it is reasonable to expect that propylene demand growth slows incrementally and ethylene demand growth benefits. In the immediate term, some quick switches could happen, but just as propylene demand marched ahead in the 1990s and 2000s because investments were made to use propylene derivatives instead of ethylene derivatives, we could begin to see investment to reverse the process. This was an incremental process for propylene over decades and we would not expect to see anything less incremental in the other direction, but ultimately this could be good for the more focused US ethylene and derivative markets if it accelerates growth in onshore demand and decreases the reliance on exports.
Source: Bloomberg, C-MACC Analysis, August 2021
