Viewpoint: US ethylene inventories uncertain

US ethylene inventories face an uncertain outlook at the start of 2022 as the timing of capacity additions and turnarounds, as well as potentially higher exports are poised to shape supplies.

US spot ethylene prices at Mont Belvieu, Texas, have fallen by more than half since prices hit a six-year high in April, when deals were reported as high as 64.25¢/lb, after a February deep freeze cut power throughout Texas. Roughly 75pc of US ethylene production was taken off line and many crackers went into early turnarounds.

Prices also are down from a recent peak of 47¢/lb, reached in the aftermath of Hurricane Ida's landfall in late August. The storm made a direct hit in the cracker-heavy area just west of New Orleans, Louisiana, and knocked out power for much of the state. Many crackers like Nova Geismar and Exxon Mobil Baton Rouge restarted after a few weeks, but Dow Taft and Shell Norco did not restart until mid-November.

Still, US ethylene inventories have rebuilt in the second half to pre-February levels. Stocks rose by 28pc in the third quarter from the second quarter as derivative consumption fell. Fourth quarter inventories should increase further as polyethylene producers are facing significant challenges selling domestically and exporting year-end inventories. Amid this year-end glut of supply, prompt month ethylene prices at Mont Belvieu, Texas, fell as low as 28.5¢/lb in December.

Although inventories are building, stock levels in early 2022 will depend on the uncertain timing of capacity additions and cracker turnarounds.

Baystar's 1mn metric tonne/yr ethane cracker in Port Arthur, Texas, began start up activities in July, but official start-up has been delayed since. Current estimates have the cracker starting up during the first quarter of 2022.

Gulf Coast Growth Ventures has started up derivatives units at it petrochemical plant near Corpus Christi, Texas, and its 1.8mn t/yr ethane cracker is expected to start up during the first quarter of 2022. Shell's new 1.6mn t/yr ethane cracker in Monaca, Pennsylvania, is expected to begin operations sometime in 2022.

An unusually heavy turnaround schedule appears to be planned in the first quarter of 2022, with some large crackers coming down for maintenance. The exact timing of the new cracker startups along with some turnarounds in the Gulf Coast will influence inventories and prices in the early part of the new year.

US ethylene exports to Asia and Europe increased in the second half of 2021. Navigator Gas posted record ethylene export volumes for November, and the company said it expects the export terminal it runs at Houston in a joint venture with US midstream firm Enterprise Products Partners to "maintain nameplate capacity going forward."

Ethylene shortages in Europe related to unplanned cracker outages as well as negative cracker margins in Asia are likely to continue into the early part of 2022 and could provide more arbitrage opportunities for cost advantaged US ethylene. Rising exports also would influence US inventories and prices in the early part of 2022.

By Austin Jones