North American Spot PE Margins Fall Below 1Q24 Average Levels; Domestic Natural Gas Feedstock Costs Surge WoW

The Weekly Catalyst

North American Spot PE Margins Fall Below 1Q24 Average Levels; Domestic Natural Gas Feedstock Costs Surge WoW

• Polymer Market Trends: US spot polyethylene (PE) spot integrated margins have trended lower than their 1Q24 average due to rising costs and export price weakness – a near-term rebound appears unlikely to us.  
• Chemical Market Trends: Asia base and intermediate spot chemical prices declined relative to US levels WoW, and we also highlight the decline in US spot methanol prices relative to recent regional natural gas strength.   
• Feedstock Market Trends: US natural gas and USGC ethane prices WoW rose ~17% and ~9%, respectively, outpacing crude oil, Ex-US naphtha, and Ex-US natural gas upticks, pinching the US feedstock cost advantage.
• Agriculture Market Trends: Crop prices moved higher WoW, while spot ammonia values, on average, mainly were unchanged, with North American producers seeing margin erosion again WoW due to higher costs.

Exhibit 1 – Chart of the Day: US integrated spot PE margins fell below their 1Q24 average for the first time in 2Q last week, and despite more US spot PP and PVC margin support WoW, we hold a generally cautious near-term outlook.

Source: Bloomberg, C-MACC Analysis, May 2024