FocusAsia faces heavy cracker turnaround schedule in 2010

24 November 2009 05:48  [Source: ICIS news]

By Peh Soo Hwee

SINGAPORE (ICIS news)--Asian ethylene buyers will have to brace for tight supply next year due to a heavy turnaround schedule at steam crackers, but a possible increase in exports from the Middle East could help ease the strain on prices, industry players said on Tuesday.

An estimated 22 crackers would be shut for maintenance in 2010 compared with 15 facilities that were taken off line in 2009 (see table below). Regional cracker operators expect ethylene prices to rise as spot cargoes would be scarce, industry sources said.

“The first half of next year seems to be healthy but after that, it is very hard to forecast,” said Hun-Soo Lee, a company official from Yeochun Naphtha Cracking Centre (YNCC), South Korea’s largest naphtha cracker operator.

Ethylene spot prices were hovering at their highest levels this year at $1,030-1,070/tonne (€690-717/tonne) CFR (cost and freight) northeast Asia in the week ending 20 November, up $30-50/tonne from a week earlier.

The price uptrend was underpinned by limited spot supplies and firm feedstock naphtha values at above $700/tonne CFR Japan, according to global chemical market intelligence service ICIS pricing.

“Eight Japanese crackers will be having turnarounds next year so there will be some support for prices. Operating rates in the country could remain at 90-95%,”said a Japanese olefins producer.

Naphtha cracker operating rates in Asia were at around 90-100% in November, helped by strong performance of downstream polyethylene (PE) sector.

The polymer sector had maintained a healthy spread of $200-300/tonne with ethylene for most of this year, and prices of the monomer had generally outperformed market expectations in 2009, market sources said.

Poor production rates in Iran – the largest Middle East supplier of ethylene to Asia – had tightened availability of ethylene considerably in 2009.

Iran’s crackers were running at an average of 50-60%  this year primarily due to cracker outages and lack of gas feedstock, industry sources said. Its ethylene exports were estimated to fall to 400,000-450,000 tonnes this year from 680,000-700,000 tonnes in 2008, traders said.

“The key tipping point is the Middle East. If the crackers have trouble next year, then there is some support (for ethylene prices),”said a Korean olefins trader.

The start-up of three new crackers in southeast Asia by 2010 could lessen the impact from the heavy turnaround schedule, industry sources said.

For instance, Shell Chemicals’  800,000 tonne/year unit in Singapore – targeted to come on stream by the first quarter of next year – was expected to have an ethylene surplus of 100,000-200,000 tonnes, depending on the operating rate, traders said.

“The start-up of southeast Asian crackers will push down polymer and olefins prices and we expect the (tight) balance to ease in the second half of the year,” said a Japanese olefins trader.

Other market participants, however, said that the performance of the PE sector would ultimately determine how well ethylene prices would fare in 2010.

“We haven’t really seen the impact from the new polymer capacities in the Middle East this year so this will be a key factor influencing ethylene prices next year,” said Singapore-based Yuha Kodaira, general manager at Marubeni Chemical Asia Pacific’s basic chemical department.

Out of the 5.8m nameplate PE capacities from the Middle East projected from end-2008 through to 2009, less than half actually came into the market this year, according to estimates from ICIS pricing.

At the heart of the concern was whether China’s insatiable appetite for petrochemicals and consumer goods would prevail into 2010 amid volatile swings in crude values and increased PE capacities within the country and from the Middle East, market sources said.

“If crude prices remain at high levels, there is some support for PE. On the other hand, competition will also intensify due to more PE capacities domestically and from the Middle East,” said a source close to state-owned energy giant Sinopec in Mandarin.

PE producers – particularly in Malaysia and Thailand – were not so optimistic about polymer values as the removal of import tariffs within the region from January next year could cause price pressures due to more competition.

“We are already feeling the effects on demand,” said a Thai olefins and polyolefins producer. “Some buyers are waiting until January to make their PE purchases.”

Cracker Turnaround Schedule 2010

Company	Location	Capacity (t/yr)	Shutdown dates
PTT	Mab Ta Phut, Thailand	460,000	Jan-Feb
Sanyo	Mizushima, Japan	470,000	mid-Feb to mid-Apr
* LG	Yeocheon, Korea	900,000	3 Mar-8 Apr
Showa Denko	Oita, Japan	675,000	13 Mar-26 Apr
Tosoh	Yokkaichi, Japan	527,000	14 Mar-16 Apr
Maoming	Maoming, China	380,000	Mar-Apr (TBC)
Keiyo Ethylene	Chiba, Japan	740,000	May-Jun
Mitsui	Osaka, Japan	450,000	Jun-Jul
Mitsubishi	Kashima, Japan	375,000	Jun-Jul
** BASF-YPC	Nanjing, China	600,000	H1 2010
*** CNOOC-Shell	Huizhou, China	800,000	H1 2010
YNCC	Yeocheon, Korea	400,000	17 May-20 Jun
Tonen	Kawasaki, Japan	515,000	Aug-Sep (TBC)
Formosa	Mailiao, Taiwan	1,030,000	Sep-Oct
Mitsubishi	Kashima, Japan	453,000	Jul-Aug
YNCC	Yeocheon, Korea	850,000	4 Oct-2 Nov
SK Energy	Ulsan, Korea	690,000	4 Oct-4 Nov
CPC	Linyuan, Taiwan	385,000	Nov-Dec
Rayong Olefins	Mab Ta Phut, Thailand	800,000	Q4
Titan	Pasir Gudang, Malaysia	300,000	H1 2010 (TBC)
Titan	Pasir Gudang, Malaysia	440,000	H2 2010 (TBC)
Yangzi	Nanjing, China	650,000	H2 2010 (TBC)

* LG Chem will debottleneck the cracker to 1 m tonnes/year.

** BASF-YPC’s cracker capacity is expected to be increased to 740,000 tonnes/year.

*** CNOOC-Shell plans to expand the cracker capacity to 1 m tonnes/year.

($1 = €0.67)

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By: Peh Soo Hwee
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