05 October 2009 06:52 [Source: ICIS news]
By Peh Soo Hwee
SINGAPORE (ICIS news)--Naphtha cracker operators in Asia have started reducing output in October due to squeezed margins, putting an end to five months of high run rates at plants, as they try to stem further falls in olefins prices, market sources said on Monday.
“There is no profit in selling ethylene,” said one Japanese producer, adding that it needed at least a spread of $250/tonne (€173/tonne) with the value of feedstock naphtha to make exports viable.
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Spot ethylene prices sank to a four-month low of $790-810/tonne CFR (cost and freight) NE Asia in early October, while propylene was traded at $870-930/tonne CFR NE Asia – the lowest level in three months – over the same period, data from ICIS pricing showed.
Weakness in key downstream polyethylene and polypropylene markets was partly to blame for the erosion in olefin values, traders said.
Leading the charge to cut operating rates were the Japanese as they were also saddled with inventory pressures from derivative plant turnarounds this month. At least three companies – Mitsui Chemicals, Sanyo Petrochemical and Sumitomo Chemical – had said they would run their crackers at lower rates of below 90%.
“The balance in
He estimated that around 17-20 cargoes (combined spot and term cargoes), or about 50,000-60,000 tonnes of ethylene, were committed to be loaded this month at a time when spot demand from China – Asia’s largest importer of ethylene – had shrunk due to start-up of new crackers in the country.
In Taiwan, state-owned Chinese Petroleum Corp (CPC) was running its three crackers in Linyuan and Kaohsiung at an average rate of 90% in October while Formosa Petrochemical Corp cut ethylene output to around the same rate this month at its Mailiao plants, market sources said.
Formosa's production cuts, however, were related to recent outages at its derivative monoethylene glycol (MEG) facilities, they added.
“The Koreans were the last ones to bring down their cracker operating rates in 2008,” one Singapore-based trader said.
($1 = €0.69)
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