This analysis is from BloombergNEF. It appeared first on the Bloomberg Terminal.
US ethylene production margins have fallen below $200 a metric ton for the first time since May 2020. Elevated ethane prices have significantly raised feedstock costs, squeezing production margins.
Crude prices have increased 180% from the beginning of the year as of Aug. 18. However, natural gas prices have more than tripled in the same period, fueled by geopolitical conflicts and a hot summer. This has caused US ethane prices, which move in line with gas, to jump to more than 60 cents a gallon. US ethylene producers use ethane as their primary feedstock. This has traditionally given them a cost advantage over their peers that mainly use naphtha as feedstock.
As a result, US ethylene production margins have halved since January. Margins of European producers, by comparison, have surpassed $1,000 a ton. The lower margins, coupled with weak demand, have forced producers to reduce runs. The US produced 7.7 billion pounds of major plastic resins in June, a drop of 6.3% from May, according to the American Chemistry Council.
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