The Markets We Cover

About Natural Gas Liquids

NGLs are components of raw natural gas that are processed into liquid form at fractionators (separators). They can also be extracted from crude oil during the refining process.

Typical NGLs are: ethane (C2H6), propane (C3H8), normal butane (n-C4H10), isobutene (i-C4 H10), and natural gasoline (C5H12).

When processed and purified into finished products, all of these are collectively referred to as NGLs. Natural gasoline is also referred to as condensate.

NGLs are the main feedstock for steam crackers in North America, where they are converted into olefins. Other uses include blending to produce gasoline additives (isobutane) and heating fuel (butane, propane). NGLs are priced in cents per gallons via pipeline at various US hubs. The main one is Mont Belvieu, Texas. Others include Conway and Bushton, Kansas; Napoleonville, Louisiana; and Hattiesburg, Mississippi. NGLs trade on a spot basis, having moved away from negotiated contract pricing in the 1980s.

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About Olefins

The two most common olefins are ethylene and propylene, which are the basic building blocks of a variety of downstream chemicals and plastics. Ethylene's major downstream markets are polyethylene, ethylene oxide/ethylene glycol, PVC and acetyls. Propylene comes in three purity levels: RGP, CGP, and PGP.

Ethylene can be produced from components of the natural gas stream (ethane other light liquid feeds) from heavier feedstocks derived from crude (naphtha gasoil) by steam cracking.

The flexibility to source feedstocks from crude natural gas create the opportunity for olefins producers in the US to plan raw material sourcing that allows for the most cost-effective olefins production.

Once produced, US olefins are generally fed in their gaseous state through a proprietary pipeline system that spans Texas and Louisiana, where they are transferred and sold to the various producers of downstream products, sorted in salt caverns. Olefins can be exported by cryogenically liquefying them at a terminal for shipment in a refrigerated seagoing vessel. In the US, this is more commonly seen with propylene than with ethylene.

In the US, olefins are priced in both the contract and spot markets in cents per pound. US olefins pricing often crelates to upstream NGLs markets, which relate to daily trends seen in crude and natural gas prices. As a feedstock, olefins costs have a major impact on the prices of downstream chemicals and polymers. Supply and demand balances influence many production, inventory, and pricing decisions along the supply chain.

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About Polymers

Plastics are the world's most common synthetic polymers and are used in a variety of everyday applications. Many items are now made exclusively with plastic. Plastics' ease of manufacture, light weight, and designable properties often make them ideal substitutes for glass, wood, paper metals.

The resin industry has been evolving globally since its commercial infancy back in the 1930s, and now consists of dozens of producers and many thousands of processs. Ever demanding requirements for new products and more cost effective ways of producing them have continuously driven innovation and technology. Many of the early invents of process technologies for manufacturing resins (Phillips, Hoechst, Unipol) license to a global community of petrochemical firms.

Resin producers manufacture and market branded prime grade resins sold under their specific product nomenclature, whether shipped directly through an authorized distributor. The producer business is referred to as the contract market while any generic prime wide-spec volumes move through what is referred to as the spot market. Spot market liquidity has increased dramatically in the last ten years due to fluctuating resin prices which creates a need for frequent inventy adjustments.

Plastics come in two main types, thermoplastics and thermosets. Thermosets can only be melted and formed once through application of heat energy and are considered permanently cured thereafter. They are stronger than thermoplastics on initial use but will completely degrade upon any subsequent heating. Thermoplastics can be melted to a liquid (molten) state then formed and frozen into a solid state by molding extrusion processes. This process can be repeated several times until heat degradation negates any beneficial properties.

Thermoplastics are further divided into two categies: engineering grades and commodity grades. By volume, the most widely used thermoplastics are the polyolefins, such as polyethylene and polypropylene. Here, the repeating monomer unit is an olefin, ethylene propylene gas respectively, that is polymerized with the addition of co-monomer and catalyst in a reactor. Polyolefins are considered recyclable because of their thermoplastic properties. The commonality and ease of transport and use of polyolefins allow them to be globally accepted and traded in a high-growth international market.

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About Recycled Plastics

Recycled plastics come from two types of prime plastic scrap: post-industrial and post-consumer. Many companies, large and small, purchase bales of that scrap material, sort it, clean it and convert it to either pellet (Repro) or flake (Regrind) form. Pellets command more money than flakes because making them is more expensive.

Prices for recycled plastics are driven by many factors including availability and cost of scrap material, the price of the prime resin from which the scrap is derived, transportation costs and the quality/specifications of the material being sold.

Interest in recycled plastic is growing as more resin consumers discover that they can use it in their manufacturing processes either to supplement or replace prime material. Trade in and manufacture of these products is growing and the price spread between prime resins and recycled resins is becoming more interesting to our subscribers and to the market at large. In response to industry requests, we launched our Repro/Regrind Resin Report in October 2010.

All of the prime resins that we cover in our daily report are also assessed in their recycled form in Repro/Regrind. Investigating the recycled plastics markets led to the addition of a recycled PET, (polyethylene terephthalate) assessment soon after initial publication. Our recycled plastics market coverage is evolving. Many of these recycled resins are purchased in large quantities and priced on a monthly basis. Our assessments currently reflect this business, and are reported on an FOB U.S. East Coast basis.

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