New PE train absorbs Dow's last merchant ethylene

Spanish Market: Petrochemicals
24/07/25

The startup of Dow's new Poly-7 polyethylene (PE) train in Freeport, Texas, a month ago has absorbed Dow's last merchant ethylene, the company said in its second quarter earnings call.

This has structurally tightened the US ethylene market, with spot prices rising by 25pc since the train's startup. "Since we've started up that train, we've seen spot ethylene (prices) improve," said chief operating officer Karen Carter. US spot ethylene at the Enterprise Products Partners' (EPC) cavern in Mont Belvieu, Texas, traded as high as 26¢/lb this week for July delivery. This was the highest EPC ethylene trade since early March.

The demand for ethylene from the new 600,000 metric tonne (t/yr) PE train, which started up on 16 June, returns Dow to its traditional position of being balanced to slightly short ethylene on the US Gulf coast. That position had been reversed for the last eight years with the startup of Dow's 2mn t/yr TX-9 cracker in Freeport, Texas in July 2017. Dow's length in the US ethylene market expanded more with its August 2017 merger with Dupont, which caused Dow to take ownership of Dupont's 1.6mn t/yr ethane cracker in Orange, Texas. This unit was net long ethylene.

The impact of Dow returning to a net short ethylene position goes beyond immediate spot pricing. The Poly-7 startup drove a 5pc quarter-on-quarter decline in net sales for its Packaging and Specialty Plastics division as the company sold less merchant ethylene than it did in the first quarter. In exports, the US ethylene export arbitrage to Europe closed over the last month with the rise in spot prices. It is likely that export arbitrage will be open less frequently going forward as less spot ethylene is available for export. Overall, the startup, which takes 600,000 t/yr of ethylene out of the spot market, will make the US market more price sensitive to periods of distressed buying, like when a major cracker shuts down unexpectedly and needs the spot market to cover its position.

The company plans to use the new train which has swing production for up to either 600,000 t/yr high density polyethylene (HDPE) or linear low density polyethylene (LLDPE) for the export of higher-value functional polymers. This will include applications like health, hygiene, food and other specialty packaging. The company expects these high value plastics to expands margins for its Packaging and Specialty plastics segment in the third quarter.

By Michael Camarda

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