Shifting feedstock slate in USA could provide propylene, PP export opportunity for South Korea

10-Aug-11

Ethane-rich natural gas discoveries in US shale gas is triggering a shift by US olefin producers to lighter feedstocks. The shale gas plays have changed the feedstock dynamics to 87% ethane and 13% naphtha m fro70% ethane feedstock and 30% naphtha. That change in feedstocks has reduced propylene production in crackers by more than 50%. It also has tightened supplies of crude-C4s and butadiene in the US. With light feedstocks expected to dominate cracking economics in the US for the foreseeable future, butadiene, propylene, and polypropylene consumers could be faced with high-priced material and product shortage, as per Platts. However, the shifting feedstock slate in the US could provide a solid export opportunity for a country like South Korea. When polyethylene in the US gets long (most likely by 2016), USA is expected to dominate the Latin American polyethylene market, to which Korea currently exports large quantities of polyethylene. High polymer prices in Latin America during the past year have motivated exports from China, Korea, Thailand, and the Middle East. These opportunities could dry up for Korean exporters as US polyethylene production ramps up during the next 3 to 5 years. Instead, Korean producers could cut polyethylene production, and instead focus on the tighter markets in the US -- such as polypropylene and butadiene. According to the Chemical Market Resources report, about 1.4% of the gas from the Marcellus shale is butane, compared to 5.46% for ethane and 74.22% for methane.