Asia cracker ops look to cut output on high costs

27 May 2008 10:40  [Source: ICIS news]

SINGAPORE (ICIS news)--More Asia naphtha cracker operators may have to reduce operating rates due to record high costs and poor margins from downstream products, industry sources said on Tuesday.

 

“With such narrow differentials, there is just no incentive to buy naphtha to produce ethylene,” an end-user said.

 

Some end-users in northeast Asia said they might have to further cut rates at their naphtha crackers to 60-70% if crude remained at such high levels of over $130/barrel.

 

Notional future values for ethylene are pegged at $1,285-1,315/tonne CFR (cost and freight) NE Asia (northeast Asia) for July and $1,215-1,245/tonne CFR NE Asia for August. 

 

In the Asian naphtha markets, the second half of July contract was notionally pegged at $1,125.00-1,128.00/tonne CFR Japan and first half August at $1,122.50-1,125.50/tonne CFR Japan.

 

If margins continued to be this bad and our crackers were still running at reduced rates, then we would not need to buy any naphtha for the next month or so, he added.

 

We anticipate some inefficient naphtha crackers would be shut down in the near term, another end-user said.

 

High naphtha prices have kept end-users at bay, resulting in SK Energy in South Korea, Chandra Asri in Indonesia and CPC in Taiwan all cutting operating rates at their crackers recently.

 

Asian naphtha broke another new historical record high late on Monday, by trading at $1,125.00/tonne CFR Japan.

 

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By: Desmond Chia
+65 6780 4359

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