Outlook for US ethylene supply shifts to abundance on return of idled crackers, expansion completion

US ethylene supply fundamentals are shifting to oversupply from tightness amid the return of idled cracking capacity and the completion of expansion projects. The situation has got compounded by lackluster demand for polyethylene, as per Argusmedia.com. After spending most of 2014 tight on supplies amid ongoing cracker outages and infrastructure constraints, ethylene supplies grew in an environment of weak demand and robust production at the end of 2014. Unplanned and planned outages kept a significant portion of ethylene production offline for most of the year, causing spot prices to fluctuate in a wide range, hitting a high of 76.5¢/lb in mid-September and then plummeting 50pc to a low of 38.25¢/lb in December. Planned and unplanned cracker outages kept supply tight earlier in 2014: * Chevron Phillips Chemical experienced a fire at its 1.78bn lb/yr (807,000 t/yr) olefins unit in Port Arthur on 7 July that kept the facility shut through mid-November. Williams' 1.9bn lb/yr cracker in Geismar, Louisiana, is still undergoing startup operations after an explosion shut the plant in June 2013. * Mont Belvieu spot prices experienced further volatility from the restart and then subsequent shutdown on the 2.6bn lb/yr Evangeline pipeline, which links Mont Belvieu storage to Choctaw, Louisiana. The pipeline declared force majeure on 4 August 2013, two months after an explosion at the Geismar unit. The pipeline returned to operations in May, but then experienced another outage in October that kept it offline until the middle of December. * Operational constraints coupled with high feedstock prices earlier this year swung in the opposite direction in the last month. With the exception of Geismar, which is in startup, other Gulf coast crackers are running. Chevron Phillips Chemical successfully expanded its Sweeny, Texas ethylene production by 200mn lb/yr. At the same time, feedstock costs plummeted with oil prices. Propane hit an 11-year low earlier this month and is still trading nearly 40pc below where it was earlier in the year. Ethane prices have fallen by 33pc. Demand for ethylene also throttled back at the end of the year. Consumers are buying on an as-needed basis in anticipation of lower prices and polyethylene is in the midst of its low-demand season. Polyethylene production fell in November to its lowest level since February, according to preliminary data form the ACC Plastics Industry Producers' Statistics Group as compiled by Veris Consulting.