Monthly Thematic Piece

Ethylene Cost and Price Forecast
April 30, 2020
Products Mentioned:
Ethylene, Propylene, Butadiene, Gasoline, Naphtha, Ethane, Propane, Natural Gas, Polyethylene, EDC, Ethylene Glycol
Companies Mentioned:
LyondellBasell, Dow, Ineos, Shell, ExxonMobil, CPChem
Subjects Covered:
Economic Scenarios, Oil Price Scenarios, Oil Products, Permian Oil Production, Regional Economics, PDH and FCC based propylene

C-MACC Scenarios – Issue No 4

Ethylene Cost and Price Forecast

In this piece we are introducing our first C-MACC price and margin forecast, laying out the methodology and choosing to look at more than one possible outcome, which we think is wise in the current environment. We are starting with ethylene but plan to add major ethylene and propylene derivatives and other products over time.  The goal with this report is to introduce the forecast methodology and the assumptions.  Forecasts will be updated monthly (or opportunistically if there are significant reasons to do so). C-MACC clients are welcome to the model and updates.

  • As we publish, we are very concerned that our “downside” case may be correct for the near-term because of the reluctance by Permian producers to cut oil production and the extreme lows in oil prices. We think there is real risk that herd mentality (and pricing) causes all to make the cut decision together, dramatically lowering ethane availability for ethylene producers in the US Gulf and causing widespread ethylene closures because of lack of feed.
  • Otherwise, the most important conclusion is around ethylene margins and these are summarized in the chart below for US Ethane based production for the three scenarios we have chosen. Note that in no case do we get back to the profitability seen in 2019 – even in 2022 – and regardless of feedstock. 
  • The second set of charts shows the ethylene cost comparisons for US Ethane, European and Asia Naphtha for each scenario – which is the critical factor in determining the opportunity for US producers to export. The base case looks difficult this year and the low case looks impossible throughout.

See PDF for Charts



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