Cross Regional Polyolefin Landed Cost Arbitrage under Differing Feedstock Cracker Yield Economics
Calculating polyolefin landed arbitrage viability demands evaluating cracker co-product yield spreads against comonomer properties and freight tariffs.
Ethane Feedstock
Meaning
Natural gas liquids provide a gaseous raw material for the production of ethylene through steam cracking. The use of ethane feedstock results in a high yield of ethylene with very few heavy secondary products. This material is primarily sourced from natural gas processing plants.
Cracker Efficiency
Processing lighter materials requires less energy per ton of ethylene produced compared to liquid feeds like naphtha. When a facility uses ethane feedstock, the cracking furnaces operate at higher temperatures to maximize the conversion rate. The resulting gas stream is simpler to separate, which lowers the capital cost of the downstream recovery section.
Maintenance cycles are also extended because ethane produces less coke in the furnace tubes.
Regional Supply
Geographic regions with abundant shale gas reserves often have a major cost advantage in polymer production. Access to ethane feedstock has historically allowed North American and Middle Eastern producers to export polyethylene at competitive prices. Pipelines transport the gas from processing hubs to the cracker.
Polymer Yield
High purity ethylene derived from this source is the primary building block for polyethylene resins. Because ethane feedstock produces minimal propylene or butadiene, crackers using it cannot easily switch to producing other monomers. Moulders benefit from the stable supply of commodity grades produced from this gas.
Low production costs for the monomer often translate to lower resin prices for the converter.