FIG. 3
Source: Petral Consulting analysis
*Spot price less cash cost.
ETHYLENE PROFIT MARGINS*
2014 2015
70
60
50
40
30
20
10
0
– 10
M
ar
gi
n,¢
/lb
Jan. Apr. July Oct. Jan. Apr.
Purity ethane
Natural gasoline
Gas oil
to 10¢/lb in January 2015 vs. 0.4¢/lb in
October 2014 and increased to 16. 8¢/
lb in March. During second-quarter
2015, spot prices at Choctaw Dome increased to 51¢/lb, while premiums vs.
Williams Hub were 14¢/lb in April and
May before spiking to almost 20¢/lb in
June.
Net transaction prices (NTP) in
first-quarter 2015 averaged 34. 75¢/
lb, 10¢/lb less than in fourth-quarter
2014. Even though production costs
for high-cost feedstock increased during this year’s second quarter, NTP
NTP did not dip below 34¢/lb until June, and even then,
only to 33. 75¢/lb.
Margins based on NTP were 23-25¢/lb for purity ethane during first and second-quarter 2015, but margins vs.
propane were 27¢/lb in the first quarter before increasing
to almost 28¢/lb in the second quarter. Margins for natural
gasoline and light naphtha of similar quality were 14¢/lb in
first-quarter 2015 but fell to 5¢/lb in the following quarter.
Fig. 2 shows historic trends in ethylene prices (spot prices
and NTP). Fig. 3 shows profit margins based on spot ethylene prices and variable production costs.
Olefin-plant feed slate trends
Petral Consulting’s monthly survey of plant operating rates and
feed slates showed ethylene industry demand for fresh feed was
1. 65 million b/d in first-quarter 2015 and 1. 70 million b/d in
second-quarter 2015. Demand for fresh feed in first-quarter
2015 was 6,600 b/d (0.4%) more than in fourth-quarter 2014
and 25,700 b/d ( 1.6%) more than in first-quarter 2014.
Demand for NGL feeds (ethane, propane, and normal
butane) was 1. 49 million b/d in first-quarter 2015 and 1. 54
million b/d in second-quarter 2015.
Demand for NGL feed in first-quarter 2015 was 1,500
b/d (0.1%) less than in fourth-quarter 2014 and 25,400 b/d
( 1.7%) more than in first-quarter 2014. Demand for NGL
feed in second-quarter 2015 was 45,700 b/d ( 3.1%) more
than in first-quarter 2015 and 124,300 b/d ( 8.8%) more than
in second-quarter 2014. NGL feeds accounted for 90-91% of
fresh feed in first-half 2015 (Table 2).
Fig. 4 shows historical trends in ethylene feed.
US propylene production
Coproduct propylene supply depends primarily on the use
of propane, normal butane, naphtha, and other heavy feeds.
The monthly survey shows demand in first-quarter 2015 was
380,700 b/d for propane, 72,900 b/d for normal butane, and
162,000 b/d for heavy feeds. In second-quarter 2015, demand
for propane was 357,000 b/d, demand for normal butane was
83,300 b/d, and demand for heavy feeds was 160,800 b/d.
vs. propane in May-June due to a crash in propane prices.
Ethane’s cost disadvantage was 4¢/lb in May and 7. 5-8.0¢/
lb in June.
Production costs for purity propane averaged 7. 6¢/lb in
first-quarter 2015 before falling to 6. 5¢/lb in the second
quarter. Production costs for purity propane in first-quarter
2015 were just 3¢/lb less vs. fourth-quarter 2014 but 26¢/lb
less vs. first-quarter 2014.
In first-quarter 2015, production costs for propane provided producers with a cost savings of 13¢/lb less vs. natural
gasoline, with propane’s cost advantage rising to 23¢/lb during the second quarter.
Production costs for natural gasoline dipped to 14¢/lb in
January but rallied in February-March to average 24-25¢/lb
for first-quarter 2015. Production costs for natural gasoline
during second-quarter 2015 were almost 30¢/lb (Table 3).
Ethylene pricing, profit margins
PetroChem Wire daily reports ( www.petrochemwire.com)
showed spot prices for ethylene in the Williams Hub averaged 36¢/lb in first-quarter 2015, some 18¢/lb (33%) less
than in fourth- quarter 2014. Spot prices stabilized in second-quarter 2015 to average 35-36¢/lb.
Even though the Evangeline pipeline remained out of service during first-quarter 2015, spot prices at Choctaw Dome
declined by 16¢/lb (January 2015 vs. October 2014). Consistent with the loss of Evangeline pipeline capacity, however, premiums at Choctaw Dome vs. Williams Hub jumped
ETHYLENE PRODUCTION COSTS Table 3
Natural
Ethane Propane n-Butane gasoline
2015 ––––––––––––––––––––– ¢/lb ––––––––––––––––––––––
January 10. 1 4. 6 4. 5 13. 9
February 9. 7 9. 3 3. 4 24. 8
March 9. 9 8. 9 3. 6 23. 9
April 9. 4 10. 9 5. 3 30.0
May 10. 2 6. 2 2. 6 30. 8
June 10. 1 2. 4 0.6 27. 5
July 9. 8 5. 9 2. 5 28. 2
Source: Petral Consulting estimates
