Plastics Reclamation Plant Liquidation
Sortation, Grinding, Washing and Starlinger Equipment For Sale
Equipment sold individually
Bids accepted first come, first served basis.
Subject to prior sale.
All offers due by Nov. 7
Click here for pictures and detailed equipment list
Contact David for additional information at 1-630-235-8171
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ANALYSIS: Supply/demand surprises create unsteady, volatile US ethylene market
HOUSTON, November 7, 2016 (PCW) -- Spot ethylene prices have been on a roller coaster ride during the last few weeks, fueled by a larger-than-expected inventory report that has sparked controversy and changing expectations of returning and expanded production.
During a six-week period, spot ethylene shed 40.7% of its value, dropping from a year-to-date high of 40.5 cpp in mid-September to 24 cpp by Nov 4. Interesting as well is how fast spot prices got to that peak from 35.5 cpp on Sep 6 – a 14.1% increase in a 10-day period. Daily volatility has picked up, beginning in September with gains or losses of 2 cpp or more occurring at a frequency not seen since late 2014.
These large day-to-day moves in both time periods coincide with a rash of ethylene plant outages. In late 2014, Dow had begun a turnaround at its 2.295 billion lbs/yr TX-8 unit at Freeport, Williams was commissioning its newly-expanded 1.95 billion lbs/yr Geismar plant and Formosa's 1.5 billion lbs/yr Olefins 1 unit at Point Comfort was shut.
Similarly, in the last few months, LyondellBasell’s 1.7 billion lbs/yr Corpus Christi unit, CP Chem’s 1.84 billion lbs/yr Cedar Bayou unit and Dow’s 1.75 billion lbs/yr Plaquemine LA-3 have been shut, while ExxonMobil’s 1.8 billion lbs/yr Beaumont units have reportedly been running at reduced rates.
Some of the recent volatility has been attributed to uncertain timing about the Corpus Christi restart, which began in mid-April and was originally scheduled to return to service by the end of August. The company announced that weather had delayed some of the work at the site and the restart target timeframe was estimated to be in late September. This was subsequently moved to late October and LyondellBasell executives said in its 3Q earnings call last week that the unit would be running at its expanded 2.5 billion lbs/yr capacity by the end of November.
Market Fundamentals Shift
At the same time, market fundamentals shifted unexpectedly when the AFPM reported on Oct 31 that 3Q 2016 ethylene inventories increased about 401 million lbs (or 35.6%) quarter-on-quarter to nearly 1.53 billion lbs. The number was far larger than the market was expecting and also represented the largest percentage inventory increase in the last 12 months.
As a result, prompt-month ethylene traded down 2 cpp, or 6.9%, in the hours following the report's release.
The stockpile bump was attributed to the new addition of inventory data from Boardwalk Louisiana Midstream, whose ethylene distribution system also includes salt dome storage facilities in Sulphur, Louisiana (effectively the Choctaw hub).
However, the inclusion of the new data addition called into question the relevance of historical inventory statistics. In response, the AFPM on Nov 4 released a note stating that new survey participants may be asked to also submit a year’s worth of historical data. It is unknown if Boardwalk did comply with this request; the AFPM data released on Oct 31 only shows a revision back to 2Q.
The momentum of sudden downward pressure on pricing has continued as uncertainty surrounded assumptions on supply/demand for the short term. Nervously watching markets sell off has created its own atmosphere of speculation around general risk tolerance and the appetite to take on new positions. October saw a sharp decline in trading volumes for next-month delivery amid the volatility, dropping from 184.5 million pounds in September to just 58 million pounds in October. At the same time, index-based trading volume jumped from 62 million pounds in September to nearly 90 million pounds in October as players showed their reluctance to commit to a fixed price.
With the bid-offer range on Monday for November ethylene at 23-25 cpp, a clear floor has not yet been established, nor has evidence of a rebound been seen. Even at 24 cpp, volumes per deal have been relatively small and trades out in the 2017 market have been offset by paper positions as the market seeks some clarity and confidence of price direction this month. -- Samantha Hartke and Kathy Hall