BofA-Chemicals Weekly：Ethane strength, corn yield downside, housing update-20250929

Ethane to outperform natural gas in 2H’25 into ‘26

Ethane, the primary US feedstock for ethylene (and consequently, polyethylene), hasseen lower production growth in the past year compared to five and ten-year trends.Year to date, ethane production has increased by ~175k b/d vs. ~200k b/d which hasbeen more typical. Consequentially, production growth is no longer outstripping demandgrowth (first time in 10 years), as export capacity ramps. US ethane exports declined~70k b/d in June due to restrictions, but have recovered and are back to seasonal highs.The Neches River export facility (120k b/d) and Nederland terminal (250k b/d) startedoperations this summer and should push ethane exports even higher in the comingmonths. Neches River is expected to increase its capacity by an additional 180k b/d in1H 2026, although we note that this capacity is flexible and could be used for propaneexports. To support this growth, the global VLEC (very large ethane carrier) fleet isexpected to nearly double from 2024 to 2026. These higher exports are driving ethanestocks lower, which is expected to continue over the coming months. Ethane prices arenow above the implied natural gas floor price, for the first time in over a year (Ex 1).Conversely, propane demand has been weaker, leaving higher y-y production prices.

Southern rust to weigh further on corn yields?

According to Dr. Cordonnier, early corn harvest has turned out weaker than expected,suggesting that southern rust has had a bigger impact on yields than initially thought.The disease spread into the Midwest in July, helped by hot and humid weather thatpromoted its development. It seems to have taken some by surprise, and even farmerswho applied treatments against it are now facing lower-than-expected yields. This isreflected in a 6% m/m decrease (from 71% to 67%) in the share of corn rated ‘good toexcellent’ in ‘Corn Condition’, though it is 17% above the 2020-2024 average of 57.4%.Dr. Cordonnier expects additional downside to USDA corn yield forecasts in October.