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Changes in Petrochemical Markets

and How PetroChem Wire


Became the US Benchmark

Kathy Hall
Founder and Executive Editor
PetroChem Wire
www.petrochemwire.com

PetroChem Wire
Kathy Hall
Executive Editor
kathy@petrochemwire.com

www.petrochemwire.com

About PetroChem Wire

PetroChem Wire was started in 2007 by Kathy Hall.

Kathy worked at Platts from1995 until 2007. Covered chem


markets starting in 1999. Managed Platts Americas Chemicals
team 2004-2007.

Sensing a dissatisfaction with the disconnects between


information services for NGLs (OPIS), base chemicals
(CMAI/Platts) and plastics (Platts/ICIS), the PetroChem Wire
was begun at the request of major US chemical producers,
traders and consumers, relying on their feedback and
deal/news contributions to the daily report.

Launched as a daily email report sent at the close of every


business day in July 2007, the chemical prices were quickly
trusted by the industry and began being used as a benchmark
in January 2008 by market participants doing deals.

PetroChem Wire data is:


Daily natural gas liquids (aka The NGLs)
Ethane, Propane, Butane, Isobutane, Natural Gasoline
Daily Olefins and Aromatics

Ethylene, Propylene, Benzene


Daily Polymer Resins

Polyethylene, Polypropylene, Polystyrene

The Petrochemical Chain: NGLs


Natural Gas Liquids (aka NGLs) are produced from EITHER crude oil
refining or natural gas fractionation.

NGLs are also referred to by their hydrocarbon chain number. You may
hear them called:
C2 (ethane)
C3 (propane)
C4 (butane)
iC4 (isobutane)
C5 (natural gasoline)
The higher the number, the heavier the hydrocarbon. Their uses are:
Ethane only use: to produce ethylene
Propane 1) to produce ethylene or propylene. 2) fuel. 3) heat/drying.
Butane 1) to produce ethylene. 2) heat/propellant. 3) gasoline blending
Natural Gasoline 1) to produce ethylene. 2) gasoline blending.

The Petrochemical Chain: NGLs

Ethane FOB Mt B EPC


Propane FOB Mt B LDH
N-Butane FOB Mt B EPC
Isobutane FOB Mt B EPC
Nat Gasoline FOB Mt B EPC

$/gal
0.80000
1.52000
1.84500
2.01000
2.25000

Mt EPC = Mont Belvieu (Texas), Enterprise Pipeline Company


Mt B LDH = Mont Belvieu, Louis-Dreyfus Hydrocarbons

The Petrochemical Chain: Olefins & Aromatics


The centerpiece of the petrochemical markets is the STEAM CRACKER.
The steam cracker takes in liquid raw materials (like NGLs) and turns them
into basic or simple petrochemicals by steam-based processes.
These are:
Ethylene

Propylene
Benzene
These are known as Monomer Chemicals or Building Block Chemicals.

The Petrochemical Chain: Olefins & Aromatics

Ethylene MT B FOB
PGP MT B FOB
RGP MT B FOB

$/lb
0.63875
0.79000
0.68000

Benzene DDP HTC

$/gal
4.11500

Mt B = Mont Belvieu (Texas)


RGP = Refinery Grade Propylene
PGP = Polymer Grade Propylene
DDT HTC = Delivered, Duty paid, Houston/Texas City

Petrochemical Chain: Polymer Resins

There are 3 major types of polymer resins:

Polyethylene made from ethylene

Polypropylene made from propylene

Polystyrene made from styrene, which is combo of benzene & ethylene

Polymers are made at plants called REACTORS, which are fed by the
respective monomer (which comes in as steam), and is liquified and finally
cooled into a solid form (pellets).
The pellets can easily be shipped around the world. Whoever buys them can
melt them and make just about anything.

Petrochemical Chain: Polymer Resins

Polymer resins come in many different grades like gasoline


Each grade has specifications that have to do with how the polymer resin
performs. They have varying degrees of thickness, clarity/color, strength
and heat/freezing tolerances.
Polyethylene
Film grades Saran Wrap, bubble wrap, contact lenses, balloons
Injection grades pen caps, buttons, game pieces, plastic forks
Blow-molded grades lawn furniture, buckets, toys, straws
Polypropylene
Injection grades bottle caps, electric cable coverings,
medical sutures, automotive parts
Film grades labels, envelopes, synthetic paper
Polystyrene
Crystal grades dashboard gauges, foam peanuts, to-go boxes
High-heat grades CD jewelboxes, hard containers, syringes

Petrochemical Chain: Polymer Resins

HDPE Blow Mold DER


HDPE Blow Mold FOB Houston
LLDPE Film DER
LLDPE Film FOB Houston
LDPE Film DER
HDPE Inj DER
HMWPE Film DER
HoPP DER
HoPP FOB Houston
CoPP DER
GPPS DER
HIPS DER

$/lb
0.67000
0.62000
0.69500
0.64000
0.77000
0.67000
0.68500
0.89000
0.85000
0.90000
0.86500
0.96500

DER = Delivered East of the Rockies


HDPE = High Density Polyethylene
LLDPE = Linear Low Density Polyethylene
HMWPE = High Molecular Weight Polyethylene
LDPE = Low Density Polyethylene
HoPP = Homopolymer Polypropylene
CoPP = Copolymer Polypropylene
GPPS = General Purpose Polystyrene
HIPS = High-Impact Polystyrene

Connecting the Chain


When crude oil jumps, the immediate thought is: where is gasoline?
Where is heating oil? Where is jet fuel?
When nat gas jumps, the immediate thought is about the effect to
power markets.

To MANUFACTURERS, the effects of crude and nat gas are followed


downstream to
NGLS
Olefins, Aromatics

Polymers

Today in the Markets


Ethylene traded lower and refinery grade propylene held steady Monday
while crude oil and NGLs ended the day sharply lower. Polyethylene was
offered lower in the spot market, and polypropylene was steady.
ETHYLENE (USD/MT)
2000
1800
1600
1400
1200
1000
800
FOB Korea

600

CIF NW Europe

400

FOB Mt Belv/USG

200

Aug-11

Jul-11

Jun-11

May-11

Apr-11

Mar-11

Feb-11

Jan-11

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

Jul-10

Connecting the Chain

So why havent you heard about olefins and polymers before?

Just like energy markets in the 1980s, chemical markets have


begun to become TRADED COMMODITIES.

As new prices are being set every day, the information on these
markets becomes a hot commodity itself!

Connecting the Chain Who Cares?


MAJOR CHEMS
XOM, Shell, Chevron, BP, Dow, DuPont, BASF, Formosa, Lyondell,
Westlake, Huntsman, Flint Hills, Conoco, Oxy
MAJOR COMMODITY TRADERS
Glencore, Vitol, Koch, Louis-Dreyfus, Phibro, Kolmar, Trammo, Noble,
Mitsui, Marubeni, Mitsubishi
MAJOR FINANCIALS
BAML, Barclays, Wachovia, JPMorgan, Goldman, Deutsche, Maquarie
MAJOR MANUFACTURING
Proctor & Gamble, Clorox, Tupperware, Bausch & Lomb, Yum Foods,
Frito/Pepsico, Loreal

MAJOR RETAIL
Wal-Mart, Target, Costco, Sears, Staples

Managing Petrochemical Risk


Traders and financial houses have been trying to offer risk management
tools for packaging since the late 1990s (Enron, SCRIM)
The development of daily cash market trading that began in 2005-2006 has
enabled a robust benchmark to develop (PCW)
The development of a benchmark enables swaps and futures contracts to
trade against it.

In 2009, NYMEX/CME launched ethylene and propylene futures contracts.


In 2010, NYMEX/CME launched polyethylene & polypropylene futures
contracts.
These contracts settle against PetroChem Wire prices.

Why do they care about PCW?

PCW is the only source for forward curves for:

Ethylene
Propylene
Polyethylene
Polypropylene
PCW also publishes forward curves for NGLs (not unique)
PCW publishes daily spreads for every product along the chain
(NGLs-Olefins-Polymers)

PCW Daily Forward Curves


Aug'2011
Sep'2011
Oct'2011
Nov'2011
Dec'2011
Jan'2012
Feb'2012
Mar'2012
Apr'2012
May'2012
Jun'2012
Jul'2012
Aug'2012
Sep'2012
Oct'2012
Nov'2012
Dec'2012
Jan'2013
Feb'2013
Mar'2013
Apr'2013
May'2013
Jun'2013
Jul'2013
Aug'2013

C2
0.73500
0.72750
0.71250
0.69750
0.68250
0.66875
0.65500
0.64125
0.62500
0.60875
0.59250
0.57750
0.56250
0.54750
0.53750
0.52750
0.51750
0.51500
0.51250
0.51000
0.50750
0.50500
0.50250
0.50125
0.50125

C3
1.45250
1.46000
1.46750
1.47500
1.48250
1.49000
1.46500
1.36750
1.30000
1.29000
1.29000
1.29625
1.30250
1.30875
1.31625
1.32375
1.33125
1.33875
1.31625
1.25625
1.20125
1.19375
1.19375
1.19875
1.19875

C4
1.73500
1.74000
1.74625
1.75250
1.75875
1.76625
1.74625
1.69375
1.63625
1.61375
1.61375
1.61375
1.61875
1.62375
1.62875
1.63375
1.63875
1.64625
1.63125
1.58375
1.53875
1.51875
1.51875
1.52375
1.52375

C5
2.14500
2.15375
2.16125
2.16750
2.17375
2.18125
2.16125
2.13750
2.12000
2.10750
2.10000
2.09625
2.09250
2.08875
2.08875
2.08875
2.08875
2.09375
2.08375
2.07375
2.06375
2.05375
2.04375
2.04375
2.04375

Ethylene
0.62500
0.61500
0.60625
0.59750
0.58500
0.57250
0.56000
0.54750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750
0.53750

PGP
0.78750
0.78625
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500
0.78500

HDPE
0.60250
0.60750
0.61250
0.61750
0.62250
0.61250
0.60750
0.60250
0.60000
0.59750
0.59500
0.59250
0.59000
0.58750
0.58500
0.58250
0.58000
0.57750
0.57500

LLDPE
0.61500
0.61625
0.61750
0.61875
0.62000
0.62250
0.62500
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750
0.62750

HoPP
0.85000
0.86000
0.86500
0.87000
0.87500
0.88000
0.89000
0.89750
0.90500
0.91250
0.91250
0.91250
0.91250
0.91250
0.91250
0.91250
0.91250
0.91250
0.91250

PCW Daily Price Spreads


Ethylene - (Ethane x. 0.422)
Ethylene - (Ethane div. 2.97)
Ethylene - Propane
Ethylene - Butane
Ethylene-Nat gasoline

$/lb
0.315
0.378
0.282
0.269
0.238

Ethylene - PGP
Ethylene RGP
RGP-Propane
PGP - RGP

-0.163
-0.055
0.337
0.108

LDPE film - Ethylene


LLDPE film - Ethylene
HDPE blow mold - Ethylene
HDPE inj - Ethylene
HDPE HMW - Ethylene

0.145
0.070
0.045
0.045
0.060

LDPE film - Ethane


LLDPE film - Ethane
HDPE blow mold - Ethane
HDPE inj - Ethane
HDPE HMW - Ethane

0.523
0.448
0.423
0.423
0.438

PP homo - RGP
PP copol - RGP
PP homo - Propane
PP copol - Propane

0.210
0.220
0.547
0.557

GPPS - Benzene
GPPS - Ethylene
HIPS - Benzene
HIPS - Ethylene

0.339
0.240
0.439
0.340

Not everyone has heard the news

The petrochemical futures contracts and the PetroChem Wire are


relatively new.
Not every company has heard of them yet.
Companies who have heard of the contracts may not have heard of
the PetroChem Wire (such as hedge funds) they find out through
word-of-mouth that PCW data is what insiders and market
makers use.
Everyone who trades these products and sets these prices reads
PetroChem Wire.

Happy to work with you, your colleagues and your customers

KATHY HALL
kathy@petrochemwire.com
+1 720 480 6288