US purity ethane availability should be plentiful and prices relatively low through 2012 as logistical issues are sorted out and more fractionation capacity comes online, LyondellBasell CEO Jim Gallogly said Thursday during an earnings call.
"I personally think ethane prices should stay low for the year," Gallogly said. "We think ethane is going to be long."
Prices for US Gulf Coast ethane have plummeted more than 35 cents/gal since January 3 -- last assessed by Platts on Thursday at 47.25 cents/gal -- because of weak demand stemming from multiple turnarounds and production problems in the olefins sector.
Ethane is the feedstock of choice for US ethylene producers, including LBI.
While he deemed the current conditions leading to such low ethane prices "abnormal," Gallogly said availability should improve in 2012 as more fractionation capacity comes online and logistical issues that lifted prices in 2011 are resolved.
"Transportation bottlenecks are being fixed," Gallogly said.
Spot ethane prices reached three-year highs in the fourth quarter of 2011, with assessments as high as 96.25 cents/gal on October 18, and staying consistently above 78 cents/gal through the remainder of the quarter.
Market sources at the time pointed to logistical constraints of getting product into the Mont Belvieu, Texas, hub for processing as key reasons for the uptick, but Gallogly said those were overstated.
Market participants expect ethane prices to rebound after the second quarter, when many of the downed crackers will have resummed operations.
In the market Friday morning, spot ethylene was heard talked steady to the previous day's assessment of 67.50 cents/lb, with bids around 65 cents/lb against offers at 70 cents/lb for February material.
Earlier Friday, LBI reported a net loss of $218 million in the fourth quarter of 2011 from a net profit of $766 million a year ago, on weak margins, higher interest cost and charges related to a refinery shutdown in Berre, France.
The company, which is headquartered in Houston, reported 2011 income was $2.14 billion.
