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MOSCOW (MRC)
-- Sky-high U.S. natural gas prices have prompted some Midwestern ethanol
producers to reduce processing in the last week, hoping instead to sell off some
of their natural gas to take advantage of current high spot prices caused by the
spike in cold weather, said Hydrocarbonprocessing.
Ethanol
margins in the Corn Belt have dropped sharply due to the frigid weather, falling
to negative-USD3.92 a gallon, lowest since at least 2010, Refinitiv Eikon data
showed. Natural gas prices have soared because of power needs, hitting their
highest levels in years due to the cold snap.
At the Waha hub in the
Permian basin in Texas, next-day gas prices rose last week to as high as
USD157.714 per million British thermal units (mmBtu).
The astronomical
prices forced some ethanol producers who have not yet purchased all their needed
natural gas to consider whether to reduce processing to avoid the high prices.
It has forced others who have their natural gas bought to consider whether to
reduce production rates to sell into the spot market. One ethanol producer
reduced his company’s run rate by more than 25% last week to sell natural gas
that he earlier had bought at a contracted price.
He calculated that his
typical cost for gas used to produce ethanol comes to just over $30,000 per day
in the spot market. But the surge in prices means that cost would amount to $2
million if he were buying gas daily. As a result, this producer said, he had to
try to sell off his natural gas, cutting ethanol production in the
process.
“The price is so ridiculous that I can’t do anything else that
makes that kind of money,” said the producer, who wished to remain anonymous for
market purpose.
As per MRC, a winter storm has brought
unusually cold temperatures, snow, and freezing rain to Texas and western
Louisiana, forcing a large share of US light olefins production offline. As of
the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at
least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade
propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC)
capacity. Many plants that remained online were running at reduced
capacity.
Ethylene and propylene are feedstocks for producing
polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report,
Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2%
year on year. Only shipments of low density polyethylene (LDPE) and high density
polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to
the Russian market reached 1 240,000 tonnes in 2020 (calculated using the
formula: production, minus exports, plus imports, excluding producers'
inventories as of 1 January, 2020). Supply of exclusively PP random copolymer
increased. |
