27 November 2008 16:28 [Source: ICIS news]
LONDON (ICIS news)--European cracker operating rates have reached historic lows as the worsening December demand outlook pushed technical boundaries to levels never seen before or even considered possible, some producers said on Thursday.
“Everyone is trying to be really creative, [to avoid mothballing crackers], we are at an historical minimum [operating rate] at one of our crackers,” a producer said.
“We’ve seen really new numbers, we are minimum, minimum, minimum,” said another key olefins producer, adding that “this is today’s view only” as it did not rule out the possibility of a temporary cracker closure in the next couple of weeks.
Most olefins producers said that they had come to a point where they had to evaluate supply and demand closely on a daily basis, with the big question how many crackers would be running through until January.
Traditionally, the minimum operating rate below which the unit is said to be unstable, was generally assumed to be around 60-70% of nameplate capacity depending on the cracker.
Producers were unwilling to divulge current operating rates.
European crackers had started to cut back operating rates back in October when it became clear that derivative demand was not picking up following the summer break.
It quickly became clear that more significant reductions were necessary as a combination of year-end destocking and financial uncertainty spread throughout the chain and impacted on all derivatives business.
Just a couple of weeks ago, the first reports of a cracker closure due to market reasons emerged and last week BASF announced that it would close 80 plants worldwide - including its ?xml:namespace>
At least two other European crackers were heard to be temporarily closing, one for 15 days in November-December and the other for a month beginning mid December.
Ironically, contract cracker margins were the best seen this decade, surpassing fourth-quarter ethylene and propylene contract prices.
However, the unprecedented drop in demand had meant that producers were not able to fully realise them and the situation had been likened to “money on the floor but being unable to bend down and pick it up”.
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