A spike in ethane prices at Mont Belvieu, Texas, driven by higher export demand, should spur heavier feedstock cracking or possibly lower operating rates in the coming monthsat non-integrated olefins plants, according to an Argus model.
The model shows cracking costs exceeding spot ethylene prices for the first time this year as ethane and ethylene prices continue to converge this month. On 18 June,the cash cost of cracking ethane surpassed spot ethylene prices by 1.15¢/lb and widened to 1.325¢/lb yesterday, according to the Argus model.
At these levels, cracking margins for both butane and ethane are near parity, which would encourage plants able to crack butane to do so because co-product prices for propylene and butadiene are strong.
Mont Belvieu EPC ethane is trading at 4½-year highs as large market participants came into the physical market to purchase volumes for export. Ethane is up by 5.875¢/USG, or 21pc, since the start of the month, while spot ethylene has fallen by 3.31¢/lb, or 21pc, amid flush supplies from steady operating rates.
The higher cash cost seen this week even surpasses the economics seen when ethylene hit a record low of 12¢/lb on 10 May. On that day, cash costs for ethane cracking remained 1.10¢/lb below ethylene prices. Ethane's cash margin remains positive, at 1.5¢/lb, while the most competitive heavier crack, butane, has slightly negative margins at 0.15¢/lb.
Ethane last traded today at 34.5¢/USG, while ethylene last traded today at 12.5¢/lb.
