Europe cracker operators trim rates on long supply

12 September 2008 14:32  [Source: ICIS news]

LONDON (ICIS news)--Europe ethylene supply is so long cracker operators are having to resort to trimming operating rates and spot price ideas are falling rapidly, industry sources said on Friday.


“Storage tanks are filled up to the brim,” said an integrated player, adding “all crackers had been reduced”.


Supply has lengthened as poorer than expected demand has combined with good cracker reliability.


“Systems are full. One unplanned cracker stop has not made the slightest difference,” said another integrated industry source.


Polyethylene (PE) demand in particular, was very weak and described as “disastrous” by some sources.


Demand was down across the board, said other observers, pointing to the other ethylene derivative sectors such as ethylene glycol, glycol ethers.


Saudi Basic Industries Corp (SABIC) said on Thursday it had reduced rates at the cracker level because of reductions on its PE production.


Other integrated ethylene sources were describing their systems as “balanced”, which to some was a clear indication of reductions upstream and downstream.


“I do believe that the only correct way [to manage the length] is to moderate production,” said a producer.


“Customers don’t buy, no orders are coming in,” said one ethylene consumer.


Consumers down the chain were waiting to see what would be settled for fourth-quarter contracts, sources said.


Expectations that a decrease was on the cards was high, given the crude and naphtha developments since the settlement of the third-quarter contract price. Buyers are only taking what they needed in the meantime.


Spot ethylene activity was non-existent according to most sources.


Weak prices in Asia and in the US had continued to focus deep-sea sellers attentions on Europe.


Several European sources were sceptical over the recent reports that a second-half of September Iranian tender had been done into the Mediterranean at €1,060/tonne ($1,472/tonne) CIF (cost insurance freight)  


“Either the deal has been done before [a while ago], or the number is not right,” said a Mediterranean-based producer.


“You can easily buy below this [€1,060/tonne] number,” one buyer said, adding there was just no outlet for spot ethylene at the moment.


“We could offer well below €1,000/tonne,” added a trader.


“It seems very difficult to place volumes in Asia nowadays, no demand, tanks are full [and] prices keep dropping through the floor,” said the trader, adding “it is not possible to place volumes in Europe unless pricing for Q4 [fourth quarter] and demand is more clear”.


Pipeline prices were notional but were being talked around €950/tonne FD (free delivered) NWE (northwest Europe), according to global chemical market intelligence service ICIS pricing.


This is down from numbers being posted at around €1,200-1,230/tonne just four weeks ago.


($1 = €0.72)


For more on ethylene please visit ICIS chemical intelligence

To discuss issues facing the chemicals industry visit ICIS connect



By: Nel Weddle
+44 20 8652 3214

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