US ethane cracking margin turns negative
Gross cracking margins for ethane on the US Gulf coast turned negative this week for the first time in two years amid stubbornly high ethane prices, ample ethylene supplies and dwindling polyethylene demand.
US ethane cracking margins on 24 June were calculated at -2.38¢/lb using an Argus model, the first negative ethane margins since the second quarter of 2020 during the depths of the Covid-19 pandemic.
If ethane cracking margins stay negative for an extended period, reduced runs heard to be occurring at some crackers may turn into shutdowns, sharply reducing ethylene production.
Ethane comprised 74pc of the US cracker feedslate in the first quarter, according to the latest data from the American Fuel and Petrochemical Manufacturers (AFPM). Even with negative margins, ethane remains the best US feedstock option, as propane, butane, and naphtha margins remain deeply negative.
For months, US ethane prices closely followed natural gas prices that climbed to a 13-year high and then retreated following an 8 June explosion at the Freeport LNG export terminal in Texas. But last week an unexpected price divergence emerged, dashing the hopes of US cracker operators that their razor-thin margins may expand.
US natural gas prices fell by a third from a 6 June peak of $9.32/mmBtu to $6.22/mmBtu at the end of last week. And ethane prices began to follow suit, dropping from a multi-year high of 68¢/USG on 7 June to 59¢/USG on 21 June. But in the last week, US ethane prices jumped by 11pc, while US natural gas prices fell another 9pc.
"I can't figure how June ethane could be so short, especially since cracker runs have already been cut due to polyethylene export constraints and thin margins," one market participant said.
One possibility for ethane's recent decoupling from natural gas is an extremely active ethane export market. Vessel tracking shows at least five very large ethane carriers (VLECs) loaded out of the Morgan's Point ethane terminal in June and another two VLECs loading out of the terminal in Nederland, Texas. With each vessel loading, large spot volumes also are being sold, adding to price strength. All the front month activity has put ethane into steep backwardation, with prompt prices trading at a 4.5¢/USG premium to August.
Ethylene spot prices have done nothing to help the margins of US cracker operators struggling with high ethane cash costs. US ethylene spot prices have fallen by 15pc in the last two weeks as crackers returning to operation add to already ample ethylene supply. US spot EPC ethylene stood at 30.25¢/lb on 13 June and was assessed at 25.75¢/lb yesterday. In the last two weeks, Motiva Chemical's 700,000 metric tonne/yr mixed-feed cracker in Port Arthur, Texas, returned to operation from an unexpected shutdown. Dow's 907,000 t/yr LHC-8 ethane-propane cracker in Freeport, Texas, also came back on line.
The near-term outlook for cracker operators remains bleak for both supply and demand. Bayport Polymers' 1mn t/yr cracker in Port Arthur, Texas, is anticipating on-specification ethylene production by mid-July. The unit began its start up on 18 April and is heard to be feeding in ethane as of last week, adding to US Gulf coast ethane demand. Demand from polyethylene is showing signs of weakening, with falling global PE prices and worries of a possible recession adding to negative demand sentiment. Demand for food packaging remains strong but demand for other types of packing is beginning to decline, underscored by accumulating inventories at major US retailers.
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US southbound barge demand falls off earlier than usual
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Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Norwegian Cruise swings to 1Q profit
Norwegian Cruise swings to 1Q profit
New York, 1 May (Argus) — US-based cruise ship operator Norwegian Cruise Line's (NCL) swung to a profit in the first quarter on record bookings. The company posted a $69.5mn profit in the first quarter, compared with a $127.7mn loss during the same period of 2023. Revenue rose by 20pc to $2.19bn in the quarter from a year earlier as the cruise operator reported record quarterly bookings. Cruise operating expenses were up by 8pc at $1.39bn in the quarter from a year earlier. Norwegian rerouted some of its voyages that were previously expected to sail through the Red Sea. But demand from other regions offset the effect of the redeployed voyages. The company spent $197.7mn on marine fuel in the first quarter, 1pc up from $194.9mn in the first quarter of 2023. The company burned 269,000t of marine fuel and did not disclose its fuel consumption for the first quarter of 2023. It expects to burn about 245,000t in the second quarter and 995,000t for full 2024, split evenly between residual fuel oil and marine gasoil. Currently, it has hedged about 35pc of its fuel oil consumption at $395/t and 75pc of its marine gasoil consumption at $746/t for the entire 2024. Starting this year, Norwegian had been applying to the EU innovation fund with the goal of accelerating the transition of six of its vessels from being methanol ready to being fully methanol capable. Biomethanol was pegged at $2,223/t very low-sulphur fuel oil equivalent (VLSFOe) or 3.7 times the price of VLSFO average in April in the Amsterdam-Rotterdam-Antwerp bunkering hub, Argus assessments showed. Methanol was assessed at $699/t VLSFOe or 1.2 times the price of VLSFO. The company also has half of its fleet equipped with shoreside technology allowing it to use port electricity and minimize emissions during port stays. Norwegian has ordered eight new vessels for delivery from 2025-2036. Separately, its subsidiaries Oceania Cruises and Regent Seven Seas will take delivery of three new vessels from 2025-2029 and two new vessels from 2026-2029, respectively. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Flogas opens Teesside LPG terminal
Flogas opens Teesside LPG terminal
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LPG World editorial: Tight spot
LPG World editorial: Tight spot
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