- Benchmark propane prices are trading below $0.40/gal for the first time in more than a decade, vs. a 2014 average price of $1.04, as current propane inventories are 89% higher than their 20-year average for this time of the year, Goldman Sachs' Ronald Koort says, noting "real concerns" that the U.S. will run out of storage capacity before October 2015.
- The analyst thinks that's good news for Dow Chemical (DOW), as the drop in propane prices will stimulate increased use as a petrochemical feedstock for ethylene production, and propane is used for ~40% of Dow's U.S. feedslate.
- Noting that Dow consumes 2B-plus gal/year of propane in the U.S. - meaning that a $0.10/gal shift in propane costs could reduce its costs by $200M/year - Koort raises his 2015, 2016 and 2017 EPS for Dow to a respective $3.03, $4.09 and $4.70 from his earlier projections of $2.96, $3.95 and $4.55.