Q1 and Q2 2010 have been a period of unusual price volatility and unexpectedly strong profitability for US ethylene makers, as per OGJ. H1-2010 has also been a period of extreme swings in spot for refinery-grade propylene and contract prices for polymer-grade propylene. The industry witnessed a series of operating problems and plant turnarounds, mainly responsible for the unusual price volatility for ethylene and polymer-grade propylene and the surge in olefin-plant profit margins.
The ethylene industry, however, also continued to increase its use of ethane. The continued shift from heavy feeds to ethane provided the underlying basis for the strength in profit margins and for price volatility in the polymer-grade propylene market. The use of heavy feeds was 200,000 bpd lower during H1-2010 than during 2004 and 2005. The ongoing shift from heavy feeds to ethane was the primary factor that reduced co-product propylene supply. Most ethylene producers continue to respond to strong economic incentives to maximize the use of ethane. Furthermore, since Q4-2007, ethane availability has been sufficient to support the steady increases in demand. Ethane's share of total fresh feed averaged 56% during H1-2010.
Two factors supported ethane's share of industry feed:
Operating rates for LPG crackers averaged 90-95% of capacity during first-half 2010.
In response to very favorable cost advantages compared with naphtha, ethane accounted for about 40% of fresh feed to multifeed crackers during Q1-2010 and 44% during Q2-2010.