Railcar &PetroChemical Update:US Chemical Shipments up 1.4%.Ethane down 4c gal to 21/c gal

Railcar loadings 4-week moving avg up 1.4%. Weekly loadings down 3.1%

    The 4-week moving average of chemical railcar loadings increased 1.4% inWeek #9(ended 02/25/2017) vs. a 1.2% increase the prior week. Loadings YTDare down 0.6%. Chemical railcar loadings represent 30% of total US chemicalshipment tonnage (followed by trucks, barges, and pipelines), offering a trendof broader chemical industry activity and demand. The more volatile measureof weekly loadings declined 3.1% YoY (versus a 4.1% increase in the priorweek) and declined 1.3% sequentially (vs. a 4.7% increase in the prior week).

    Ethane prices down 4c/gal to 21c/gal. Propane down 5c/gal to 61c/gal

    Ethane prices declined 4c/gal last week to 21c/gal (vs its fuel value of 19c/gal). While US ethane supply/demand (s/d) fundamentals remain loose,ethane rejection, which peaked at 500-600k bpd in 1H16, has declinedfollowing the September start-up of Enterprise Products’ 200k bpd ethaneexport facility in Houston. Coupled with higher natural gas prices, ethaneprices have nearly doubled since the beginning of ‘16(13.50c/gal). Starting in2H’17, we expect US ethane s/d fundamentals to tighten further driven by600k bpd of new demand from the start-up of 8greenfield ethylene crackers in’17-’19. As the market tightens, we expect ethane to trade toward its historicalpremium of ~10c/gal vs its fuel value, with the premium reflectingfractionation, transportation and storage costs. Based on DB’s ’17US NaturalGas price forecast of $3.13/MMBtu, we estimate ethane prices will movetoward 30c/gal by y/e ‘17.