Hurricane Laura and Delta shut down much of the steam cracking plant along the U.S. Gulf Coast (USGC). Ethylene production decreases. Exports of ethylene from the GULF Coast are recovering from their trough.
OPIS calculates that the gulf Coast exported 53,500 tonnes of spot ethylene in November, of which 41,000 tonnes were exported through the Enterprise Navigator ethylene terminal. Data showed ethylene exports improved in November from October. Spot ethylene exports totalled 28,000 tonnes in October, of which 16,500 tonnes were exported through Enterprise Navigator terminals, compared with 42,000 tonnes in September and 43,500 tonnes in August.
Ethylene production dropped significantly in September and October as Hurricane Laura made landfall in Lake Charles, Louisiana, in late August, and Hurricane Delta made landfall in early October. The region produces a quarter of America's ethylene. Many cracking units were unable to operate due to a prolonged power outage in the area. At its worst, about 40 percent of the gulf coast's roughly 228 million pounds of daily ethylene production was shut down.
After the hurricane, the malfunction was largely under control. OPIS data showed that all ethylene plants affected by the hurricane were back in operation, with two exceptions -- Dow's 688,000 ton/year plant in Orange, Texas, was still undergoing repairs; Indorama's 430,000 ton/year facility in Lake Charles remained shut down after a lightning strike on August 1 and is not expected to resume operations until the first quarter of 2021.
In addition to the disruption caused by the storm, Nova's 884, 000-ton/year ethylene plant in Gainesville, Louisiana, was shut down for a month in mid-September due to a power failure. Basf Total's 1.05 mtPA ethylene cracking plant in Port Arthur, Texas, was shut down from mid-June through late October due to a compressor problem. Formosa Plastics' 680,000 ton/year Olefin -1 facility in Point Comfort, Texas, has been out of service since March 21. These ethylene plants are out of service, further exacerbating the shortage of ethylene in the US.
Industry insiders say demand for ethane feedstock has returned to the usual 1.8 million b/d, and could be higher, as multiple cracking units start to come back into operation. Industry insiders expect the price reaction to be relatively slow because of the oversupply of ethane caused by the shutdown of cracking units. On the other hand, if ethylene exports continue to rebound, ethylene prices may follow the trend. Spot ethylene prices in Choctaw, Louisiana, rose from 12.75 cents a pound in early August to 22.5 cents a pound after Hurricane Laura. Louisiana ethylene rose further to 31.00 cents a pound in late September and fell to 17.75 cents a pound in early November. The Choctaw ethylene closed at 22 cents a pound as of Nov. 16.
At Enterprise Hub in Mont Bellevue, Texas, export prices for ethylene rose to 26.5 cents a pound from 19.0 cents in early August. Ethylene prices at the hub peaked at 27 cents a pound at the end of September, but stabilized at 22 cents to 26 cents a pound in October. Ethylene prices fell to 18.5 cents a pound in November after an active hurricane season, but recovered to 20.0 cents a pound on Nov. 16.
Navigator reported 90 percent utilization of the ethylene export terminal this summer. Spot exports of ethylene from the U.S. Gulf Coast are currently 346,600 tons, according to OPIS. The company said in its third-quarter financial report that its 30,000-ton storage tanks at the export terminal were undergoing trial operations and were expected to enter service in December. Once the project goes into production, the terminal will have an annual throughput of about 940,000 tons.