15 September 2004 07:22 [Source: ICIS news]
SINGAPORE (CNI)--India's Reliance Industries is focusing on its downstream petrochemical operations instead of cashing in on the strong ethylene prices, a company official told CNI on Wednesday.
In the past few months, several Asian cracker operators have been selling spot ethylene cargoes and slowing down their polyethylene (PE) output, taking advantage of the strong ethylene prices.
Reliance Industries, which operates four crackers with a total capacity of 1.7m tonne/year, produces ethylene, propylene, monoethylene glycol (MEG), PE, ethylene oxide (EO), terephthalic acid, polypropylene (PP), polyvinyl chloride (PVC), vinyl chloride monomer (VCM) and aromatics.
"We're doing very well with our downstream chemicals sales, especially with the high prices for most products," the official said. Reliance Industries - the first Indian company to make the Fortune 500 list - is making good margins even for its PE production because the company produces its own ethylene feedstock, he said.
"If we've to buy our feedstock from the expensive spot market, that would hurt our margins significantly," the official said. Reliance is refraining from buying high-priced ethylene spot cargoes, he said.
Reliance Industries is now "well-balanced" between its ethylene production and requirements. "We're usually slightly short of ethylene, but we adjusted our requirements so that we don't have to buy any spot ethylene." The company has not bought spot ethylene for the past several months, he said.
When asked about the possibility of opportunistic sales of high priced ethylene at the expense of its downstream production, the official said that Reliance Industries does not have that option, mainly because of a closed arbitrage window to Asia.
"We can't sell ethylene to Asia where the prices are high because of the strong freight rates. It wouldn't make economical sense," he said. Also, the nearest market for India would be the Middle East, which has its own ample supply of ethylene, he said.
The official said that Reliance Industries is running all four crackers at 100% of capacity, and its downstream units at close to 100%.
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