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THIS WEEK'S TOPIC
PROPANE DEMAND
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Keeping up with trends
in exports, petrochemicals
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Exports and petrochemicals are two propane demand areas we reference often in Trader's Corner. They've become more of a popular topic for us – and propane retailers – because each market has experienced an increase in propane gallon consumption in recent years.
Propane market analysts who speak at industry events emphasize the importance of these demand areas to propane retailers for a couple of reasons. Retailers are often consumed by their day-to-day business operations and could easily overlook trends taking place in nontraditional markets, especially when some of this activity is happening away from our borders. In addition, exports and petrochemicals consume a significant amount of propane volume, potentially impacting the U.S. supply situation and prices.
As Debnil Chowdhury of IHS told attendees of the National Propane Gas Association’s 2016 Winter Board of Directors Meeting in early February in Savannah, Ga., “The same propane you're selling here to your customers could be destined to other parts of the world."
We reference these two demand areas again this week because they have made news headlines recently. These headlines help demonstrate trends in exports and petrochemicals and an increase in infrastructure investments.
(continued below)
The U.S. Energy Information Administration (EIA) released a report March 16 outlining an increase in U.S. petroleum product exports, including propane. The agency says U.S. exports of propane averaged 615,000 barrels per day (bpd) in 2015, up 193,000 bpd from the previous year. These exports are mainly headed to Asia, averaging 220,000 bpd in 2015, an increase of 138,000 bpd from 2014, EIA reports. Low propane prices have encouraged companies to expand propane export capacity, EIA adds.
Asia is seeing this increase in propane consumption due to the petrochemical sector and significant growth in propane dehydrogenation (PDH) capacity. PDH plants basically convert propane into propylene, which is used in the production of plastics. China has seven operational plants, consuming an estimated 200,000 bpd of propane feedstock, according to a 2015 report from EIA. Other PDH plants in Asia consume an additional 50,000 bpd.
Within U.S. borders, two companies are currently operating PDH plants – Flint Hills Resources in Houston (consuming 30,000 bpd) and Dow Chemical in Freeport, Texas (consuming 35,000 bpd). Earlier this month, Dow Chemical said it completed a performance test, certifying that its unit is operating at full capacity.
According to ICF International, two plants are under construction for 2017 – Enterprise Products Partners in Chambers County, Texas (which will consume about 35,000 bpd), and Formosa Plastics in Point Comfort, Texas (which will consume about 31,000 bpd). Four additional plants are planned beyond 2017.
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CONNECT
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WHAT IS COST MANAGEMENT SOLUTIONS?
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The Propane Price Insider is an email service that provides:
- Three daily price Flash Wires
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- Wednesday inventory data updates around 11 a.m. ET
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Evening report with executive summary, weather maps and complete review of energy prices that are based on propane's Btu equivalent
For a free 10-day trial subscription by email, sign up online here or call 888-441-3338.
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Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
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Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
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Detailed market recommendations on hedge and pre-buy entry points
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Prompt market execution of hedging strategies
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Supply cost analysis and recommendation as to effective hedging strategies
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