Assume The Position! – Cheap US Ethane Spurs Export & Domestic Ethylene Optimism, Capital Flows Will Continue

Key Findings

General Thoughts: US ethane values near YTD lows and at the low end of the 2002-2024 range mean one thing (considering much higher ethylene feedstock costs abroad) – US ethylene producers are in an enviable position.
Supply Chain/Commodities: Canadian rail issues could disrupt Canadian and US polymer markets and allow US PE sellers to argue for near-term contract price support – uncertainty is higher than any volume impacts currently.
Energy/Upstream: Recent movements in Brent crude oil prices relative to US natural gas underestimate the global cost advantage seen by North American ethylene producers shown by Ex-US naphtha values relative to US ethane.
Sustainability/Energy Transition: We discuss polymer producer investment in the resin recycling arena to boost sustainable product offerings – the investment is easier among those, such as in the US, with greater FCF to deploy.
Downstream/Other Chemicals: We highlight movements in the Chinese yuan relative to the US Dollar, and we compare the total value of Chinese exports to per-unit value trends to show that export volumes remain elevated.