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Foreign feedstock makes us weak. George Gale Austin, November 2007. N I S. Foreign naphtha makes us weak. When USA attracts arbitrage cracker-feed naphtha, US chemical companies pay more for feedstock than their overseas rivals.
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Foreign feedstock makes us weak. George Gale Austin, November 2007 NIS
Foreign naphtha makes us weak. • When USA attracts arbitrage cracker-feed naphtha, US chemical companies pay more for feedstock than their overseas rivals. • High feedstock cost means low margins, if companies must compete against imports for downstream sales at home, and difficulty competing in export markets. • When the global naphtha market gets long, USA clears it. But functioning as market of last resort makes US buyers high-cost producers. • Strength in the naphtha market leaves us weak where it really counts.
Does USA really need foreign naphtha? Source: NPRA, NIS
Liquids imports decline – thanks to naphtha. Source: EIA, NIS
Cross that line very carefully. C&F spreads
FRN could mean Foreign Real Naphtha. Loosely, advantage foreign FRN vs. domestic C5+
Foreign naphtha makes us weak. • USA has the most flexible ethylene industry on earth. • US chemical companies run base-load naphtha. • To clear the global naphtha market, they must see a reason to run naphtha above that base-load. • Naphtha must give better value than other feedstocks. • Other feeds must perform worse in flexible crackers. • When Houston sucks in the world’s excess naphtha, Europe and Asia operate on cheaper feed than USA. • What does that make us? (a) unconcerned (b) generous (c) strong (d) none of the above