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Foreign feedstock makes us weak.

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.

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  1. Foreign feedstock makes us weak. George Gale Austin, November 2007 NIS

  2. 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.

  3. Does USA really need foreign naphtha? Source: NPRA, NIS

  4. USA finds heavy feed, at home if necessary.

  5. Liquids imports decline – thanks to naphtha. Source: EIA, NIS

  6. Source changes more than total liquids.

  7. Domestic (LVN) wins in mid-2007.

  8. Naphtha prices move almost in unison.

  9. Cross that line very carefully. C&F spreads

  10. Lights and naphtha swap lead in US feeds.

  11. Flexibility has a domestic dimension.

  12. FRN could mean Foreign Real Naphtha. Loosely, advantage foreign FRN vs. domestic C5+

  13. USA buys FRN when it beats light feeds.

  14. USA rarely buys much arbitrage FRN.

  15. USA pulls FRN by paying a high price.

  16. Getting FRN can spell trouble.

  17. 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

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