With ExxonMobil and Baystar’s ethylene plants in start-up and Shell expected to come online in Pennsylvania in 1H 2022, the news that Braskem wants to double its ethane imports from the US in 2022, adds to concern that the US may struggle to meet ethane needs at peak demand rates in 2022. We would be less concerned if we saw natural gas production rising, which is unclear for 2022, despite the expected new LNG capacity. Ethane is likely to follow any upward movement in natural gas pricing as there will be a need to bid the product away from heating alternatives. The increment suggested by Braskem in the Exhibit below is not larger in the overall scheme of US ethane demand, but every gallon may matter in 2022. See today's daily report for more.
The chart below focus on the ethylene cost curve and show that the US currently retains a distinct cost advantage despite escalating domestic feedstock costs. The current cost advantage in the US is sufficient to move ethylene derivatives into most markets profitably and while US spot prices for ethylene may not quite reflect the levels needed to stimulate exports today – US ethylene costs certainly do. The restart of the Nova unit in Louisiana may put some further downward on US ethylene prices but as we discussed yesterday, given the weather risks in 3Q it is an interesting dilemma today over whether you sell surplus ethylene or store it on the basis that spot prices will rise because of production outages – this time last year the “store it” decision would have been the right one as spot prices rose through 3Q.