About Markets

NGLs are components of raw natural gas that are processed into liquid form at fractionators (separators). They can also be extracted from crude oil during the refining process.

Typical NGLs are: ethane (C2H6), propane (C3H8), normal butane (n-C4H10), isobutene (i-C4 H10), and natural gasoline (C5H12).

When processed and purified into finished products, all of these are collectively referred to as NGLs. Natural gasoline is also referred to as condensate.

NGLs are the main feedstock for steam crackers in North America, where they are converted into olefins. Other uses include blending to produce gasoline additives (isobutane) and heat or fuel (butane, propane). NGLs are priced in cents per gallons via pipeline at various US hubs. The main one is Mont Belvieu, Texas. Others include Conway and Bushton, Kansas; Napoleonville, Louisiana; and Hattiesburg, Mississippi. NGLs trade on a spot basis, having moved away from negotiated contract pricing in the 1980s.

The two most common olefins are ethylene and propylene, which are the basic building blocks for a variety of downstream chemicals and plastics. Ethylene's major downstream markets are polyethylene, ethylene oxide/ethylene glycol, PVC and acetyls. Propylene comes in three purity levels: RGP, CGP, and PGP.

Ethylene can be produced from components of the natural gas stream (ethane or other light liquid feeds) or from heavier feedstocks derived from crude (naphtha or gasoil) by steam cracking.

The flexibility to source feedstocks from crude or natural gas create the opportunity for olefins producers in the US to plan raw material sourcing that allows for the most cost-effective olefins production.

Once produced, US olefins are generally fed in their gaseous state through a proprietary pipeline system that spans Texas and Louisiana, where they are transferred and sold to the various producers of downstream products, or stored in salt caverns. Olefins can be exported by cryogenically liquefying them at a terminal for shipment in a refrigerated seagoing vessel. In the US, this is more commonly seen with propylene than with ethylene.

In the US, olefins are priced in both the contract and spot markets in cents per pound. US olefins pricing often correlates to upstream NGLs markets, which relate to daily trends seen in crude and natural gas prices. As a feedstock, olefins costs have a major impact on the prices of downstream chemicals and polymers. Supply and demand balances influence many production, inventory, and pricing decisions along the supply chain.

Plastics are the world's most common synthetic polymers and are used in a variety of everyday applications. Many everyday items are now made exclusively with plastic. Plastics' ease of manufacture, light weight, and designable properties often make them ideal substitutes for glass, wood, paper or metals.

The resin industry has been evolving globally since its commercial infancy back in the 1930s, and now consists of dozens of producers and many thousands of processors. Ever demanding requirements for new products and more cost effective ways of producing them have continuously driven innovation and technology. Many of the early inventors of process technologies for manufacturing resins (Phillips, Hoechst, Unipol) license to a global community of petrochemical firms.

Resin producers manufacture and market branded prime grade resins sold under their specific product nomenclature, whether shipped directly or through an authorized distributor. The producer business is referred to as the contract market while any generic prime or wide-spec volumes move through what is referred to as the spot market. Spot market liquidity has increased dramatically in the last ten years due to fluctuating resin prices which creates a need for frequent inventory adjustments.

Plastics come in two main types, thermoplastics and thermosets. Thermosets can only be melted and formed once through application of heat energy and are considered permanently cured thereafter. They are stronger than thermoplastics on initial use but will completely degrade upon any subsequent heating. Thermoplastics can be melted to a liquid (molten) state then formed and frozen into a solid state by molding or extrusion processes. This process can be repeated several times until heat degradation negates any beneficial properties.

Thermoplastics are further divided into two categories: engineering grades and commodity grades. By volume, the most widely used thermoplastics are the polyolefins, such as polyethylene and polypropylene. Here, the repeating monomer unit is an olefin, ethylene or propylene gas respectively, that is polymerized with the addition of co-monomer and catalyst in a reactor. Polyolefins are considered recyclable because of their thermoplastic properties. The commonality and ease of transport and use of polyolefins allow them to be globally accepted and traded in a high-growth international market.