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Railcar &PetroChemical Update:US Chemical Shipments up 6.6%.Ethane up 1c/gal to 23c/gal

类型:投资策略  机构:德意志银行   研究员:David Begleiter  日期:2018-01-08
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Railcar loadings 4-week moving average +6.6%. Weekly loadings up 5.9%.

    The 4-week moving avg of chemical railcar loadings increased 6.6% in Week#52 (ended 12/23/2017) vs. a 5.2% increase the prior week. Loadings YTD areup 1.5%. Chemical railcar loadings represent 20% of total US chemicalshipment tonnage (followed by trucks, barges, and pipelines), offering a trendof broader chemical industry activity and demand. The more volatile measureof weekly loadings increased 5.9% YoY (versus a 8.2% increase in the priorweek) and increased 2.9% sequentially (vs.a 0.5% decrease in the prior week).

    Ethane prices up 1 c/gal to 23 c/gal. Propane flat at 97 c/gal.

    Ethane prices rose 1.0 c/gal last week to 23.1 c/gal (vs its fuel value of 19c/gal), continuing their recovery following the 4 c/gal decline four weeks agoon several delayed cracker projects and a robust build of ethane inventory.

    While US ethane supply/demand fundamentals remain loose, ethane rejection,which peaked at 500-600k bpd in 1H16, has declined following the September’16 start-up of Enterprise Products 200k bpd ethane export facility in Houston.

    Starting in 1H’18, we expect US ethane s/d fundamentals to tighten further,driven by 600k bpd of new demand from the start-up of 8 greenfield ethylenecrackers in ’17-’19. As the market tightens, we expect ethane to trade towardits historical premium of ~10c/gal vs its fuel value, with the premium reflectingfractionation, transportation and storage costs. Based on DB’s ’18 US NaturalGas price forecast of $3.30/MMBtu, we estimate ethane prices will likely movetoward 32 c/gal by year-end ‘18.

    Propane prices rose 0.4 c/gal last week to 97.3 c/gal. While propaneinventories were down 4% last week to 71MM bbls, they are 18% and 8%below their 3 and 5-yr avgs, respectively. Longer term, we expect propaneinventories to decline due to higher exports (+20% in ’16 vs up 12% in ‘15, upin ’17E).

    Spot ethylene up 0.5 c/lb to 27.6 c/lb. Margins compress 0.4 c/lb to 12 c/lb.

    Spot ethylene prices rose 0.5 c/lb last week to 27.6 c/lb (vs the Novembercontract price of 33.25 c/lb). Spot deals for December ranged from 27.5 to27.75 c/lb with deals for January at 28 c/lb. Average spot ethylene marginscompressed 0.4 c/lb last week to 12.0 c/lb as higher production costs morethan offset higher selling prices.

    Polymer grade (PG) propylene spot prices were higher last week with deals forDecember delivery ranged from 48.5-49.5 c/lb. December propylene contractprices settled up 1 c/lb at 50.0 c/lb for PG and 48.5 c/lb for chemical grade.

    This follows a 1 c/lb increase in November, a 1.5 c/lb increase in October and 7c/lb increase in September. The 10.5 c/lb, or 27%, increase in prices sinceSeptember has been driven by supply tightness due to Hurricane Harvey whichcaused outages at multiple US Gulf Coast olefins and refineries as well asdelaying a new propane dehydrogenation (PDH) unit which had beenscheduled to start up in September (but started-up two weeks ago).

    3.8% of North American ethylene capacity expected to be offline in January.

    Per IHS, FPC USA’s Point Comfort, TX cracker (1.7% of North American {NA}ethylene capacity) and Shell Chemical’s Norco, LA cracker (2.1% of NAethylene capacity)were offline last week due to operational upsets. In addition,CPChem’s Cedar Bayou, TX cracker (2.1% of NA ethylene capacity) restartedlast week after maintenance. For ’17, IHS forecasts NA ethylene productionlosses of 5.1B lbs, or 6.1%, of capacity. This compares to 4.5B lbs, or 5.5%, ofcapacity in ’16 and 3.1B lbs, or 4.1%, of ethylene capacity in ’15.

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