In an important, but inevitable, change in tone, it is worth noting that the Borouge ethylene expansion announcement includes the idea that the complex will explore the possibility of a major carbon capture facility that will take much of the CO2 from the existing complex as well as the new plant. We have stated previously that the mood has changed sufficiently such that large industrial investments without a carbon abatement plan will not get approval from stakeholders and this is a prime example of what we expect. Locations with low-cost CCS will see disproportionate investment in our view and Abu Dhabi already has CCS in place as Adnoc is selling blue ammonia already to Japan. As we noted in a recent Sunday Piece, we expect carbon abatement challenges to slow expansions in basic chemicals and, despite this announcement by Borealis, see a market shortage in 2024/25 as a consequence.
Polymer grade propylene in the US is weakening, albeit slowly, but remains very high versus history, versus ethylene and incremental costs of production. Propylene has the same volatile dynamic that ethylene has today in that if short, consumers can pay a lot more, and if long the price was a long way down to reach any cost hurdle. Just like ethylene we expect the market to show meaningful volatility in 3Q 2021 unless we get a storm effect in the US that impacts production more than demand. The futures market for propane and propylene expects propylene to fall relative to propane and barring weather events this is probably a reasonable view. See more in today's daily report.
USGC ethylene spot prices have weakened since reaching a multi-year peak in mid-April, something we have discussed for some time. This week's downtick in propylene values is a bit more unique as it has occurred alongside weakness in other monomer markets, which is a general trend that appears likely to gain momentum. Most monomer markets are weakening from recent 2Q21 highs in the US. We broadly find an increasing level of support for our view that many commodity chemical product prices will peak for the year in 2Q21. Exhibit 1 in our Daily Report shows an Asia arbitrage that should allow US ethylene to move to Asia, but is in the potential to take it because of local Asia surpluses, Asia prices will remain under pressure, although ethylene values in this region are fast approaching costs. We will soon be back to the previous equilibrium in an oversupplied ethylene market, where the economics of Asia production sets prices, and US exporters make a margin based on their cost advantage. The question now is how long it is before polymer prices follow.
The easing of US base chemical spot pricing continues and has now spread, as expected to polymer grade propylene. Supply now appears to be back to levels that do not reflect weather-related interruptions and despite the very strong downstream demand in the US the inevitable monomer surpluses are appearing. The US is a net importer of benzene and consequently, we see a floor being reached pretty quickly here, and while propylene prices could drop much further, PDH economics will provide support, and with a higher propane price, that support will likely be much higher than the price support for ethylene.
The chart below and the others in our daily report linked add more weight to our argument that polymer grade propylene prices in the US have some downside and that it could happen relatively quickly, especially if ethylene producers play the current propane feedstock arbitrage to their full extent. Given weaker propylene derivative markets outside the US, propylene derivative pricing would likely come under some negative pressure if propylene prices fell.