Ethane's tumble seen boosting profits at Dow, Lyondell, Westlake

|By:, SA News Editor

Owing to the shale gas revolution, a glut of ethane has flooded the market, so much so that the natural gas liquid is poised to become cheaper than natural gas itself; it’s down 70% in two years and the trend could continue, materially boosting profits for Dow Chemical (DOW), LyondellBasell (LYB) and Westlake Chemical (WLK).

The slide in ethane prices may begin to accelerate as soon as Q1 2014, when Enterprise Product Partners (EPD) opens its Appalachia-to-Texas ethane pipeline, which has the capacity to bring 190K bbl/day of ethane to Gulf coast petrochemical makers, exceeding current demand by ~20%.

U.S. chemical producers "may have significantly more upside to margins than previously contemplated even without rising chemical prices," a Cowen analyst says.