Demand dips as supply grows
PADD III demand for ethane has been increasing with new capacity coming online. The surge in natural gas prices is threatening ethane cracking margins. Demand in PADD III, demand is expected to decrease in the second quarter. Reports suggest that logistical challenges in rail transportation and storage are causing disruptions in ethane exports to Asia. The US exported 120,000 b/d and 130,000 b/d of ethane to India and China respectively in February, the last month of actual data available.
However, ethane exports to China are expected to have dropped in the second quarter. PADD I demand will begin to ramp up in mid-2022 as the Shell Pennsylvania ethylene cracker comes online. PADD I demand is expected to increase by early 2023.
On the supply side, ethane supply is expected to continue to grow this year even as demand weakens. In PADD III ethane production is expected to reach 1.67 million b/d in the second half of 2022. In 2023, PADD III production will continue to grow in the fourth quarter.
Chinese ethane demand dropped in April from February and March. Demand is expected to return to by July. Phase II of the Satellite Petrochemical project launching this year will sustain Chinese imports later in the year. Indian demand is expected to remain flat at 200,000 b/d through 2023.
These dynamics will push the US ethane balance into a surplus in May and June. Ethane exports to Asia and increased ethane rejection will likely increase until margins improve.