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ANALYSIS: Ethane cheapest cash cost as propane strengthens, co-products flag

HOUSTON, February 26, 2016 (PCW) -- This week, ethane retook its title of the cheapest feedstock to produce ethylene, something the lightest NGL purity product has not done since early last October.

This phenomenon, which became the norm in mid-2013 (see graph below), came on the back of liquids-rich shale production, leading many companies to announce world-scale ethane crackers in the US. From an NGL price perspective, ethane of late has been weighed down by crumbling natural gas prices, which are now at multi-year lows, and increasing domestic production.

Propane, which had been the cheapest feedstock for the past several months, however, has managed to buck crude oil’s collapse recently, thanks to heating demand and increased exports, among other factors.

Last year, propane and normal butane jostled for the cheapest title, mainly due to the continued relative price strength of co-product yields, such as propylene, benzene and butadiene. Ethylene, when produced by cracking ethane, sees minute amounts of these co-products, when compared to cracking other NGL purity products (see chart below).

Since the beginning of this year, however, PetroChem Wire prices show that ethylene prices rose about 3.4%, largely due to plant outages, while these other co-products saw their prices decline between 8-25%. -- Samantha Hartke

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