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Aug 20 (Reuters) - U.
S.
ethylene profit margins have recovered to February levels, after a sharp decline in March-May due to higher raw material costs and weaker demand
.
Profit margins have more than tripled since mid-May after falling 73% in the first three months
.
Ethylene margins faced compression in the first half of the year as a wave of new cracking capacity and delayed derivatives start-ups hampered supply
.
The outbreak of the coronavirus crisis in the U.
S.
has exacerbated supply-demand imbalances as demand for some derivatives is hurt by containment measures
.
On the cost side, the price of raw natural gas liquids (NGLs) has risen amid concerns over cuts in oil and gas production that will cut natural gas production
.
As a result of these factors, the U.
S.
ethane-ethylene spread has narrowed rapidly and then widened
.
Natural gas prices recovered faster than crude oil, as market participants speculated that lower oil and gas production would tighten gas supplies
.
LNG production figures did not support these concerns, and ethane price growth has slowed accordingly
.
The market for ethylene and its derivatives has been surprisingly buoyant, driving demand-side margins back up
.
"Ethylene and polyethylene exports were particularly strong due to the reopening of overseas economies and greater demand from the packaging industry," said James Wilson, senior analyst at ICIS
.
This is partly due to a 65% rise in ethylene spot prices since mid-May
.
