US Ethylene Producers Soak Up The Sun, US Propylene Also Sun Bathing But Faces A Cloudier Global Setting

Daily Chemical Reaction

US Ethylene Producers Soak Up The Sun, US Propylene Also Sun Bathing But Faces A Cloudier Global Setting

Key Findings

• General Thoughts: US polymer prices have not reacted as aggressively to Hurricane Beryl and USGC production issues as its base chemical markets, and we discuss other factors driving polymer price support in the near term.
• Supply Chain/Commodities: We highlight the recent strength in US spot ethylene and polymer-grade propylene prices, which could prove negative for non-integrated buyers and put downstream product margins at risk.
• Energy/Upstream: We highlight developments in Asia natural gas and propane prices relative to US levels, which is a plus for US chemical feedstock exporters but much less so for global chemical markets amid Asia oversupplies.
• Sustainability/Energy Transition: Global carbon capture capacity announcements and growth forecasts through 2035 call for the US to see the most growth; however, the number of new project announcements has slowed.
• Downstream/Other Chemicals: We discuss recent interest rate developments and the negative impact of high interest rates on chemical sector M&A and related valuations amid a high level of uncertainty into late 2024/2025.

Exhibit 1: US spot ethylene and propylene prices surge higher into 3Q24 on an absolute basis and respectively relative to US average spot polyethylene (PE) and polypropylene (PP) prices, as shown in Exhibit 2.

Source: Bloomberg, C-MACC Analysis, July 2024

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