Upstream economics to determine olefins prices - consultant

03 March 2010 12:47  [Source: ICIS news]

By Linda Naylor

Upstream economics to determine olefins pricesBRUSSELS (ICIS news)--Naphtha economics will continue to set the prices for olefins, with any recovery not expected to be demand-led, said a consultant at an industry conference on Wednesday.

“No matter how bad things are in petrochemicals, upstream naphtha and crude oil will determine pricing,” Alastair Hensman, a manager with Nexant’s ChemSystems consultancy, said at the 5th ICIS World Olefins Conference.

Massive capacity additions in the Middle East and Asia meant that closures in Europe were “highly likely”, he continued, but as yet targets were unclear.

New Middle Eastern capacities were based mainly on gas feedstock, but Hensman said he expected naphtha to remain the major pricing influence for olefins.

“From the price-setting perspective, naphtha is still an important part of the cost curve, but the feedstock profile is changing,” he said.

The Middle East would play a major role in olefins supply in years to come, according to Hensman.

“Between 2005 and 2015, the Middle East is adding more ethylene capacity than is currently installed in Europe,” he said.

Weak downstream demand in the automotive and construction sectors in Europe had affected propylene markets and caused disruption to olefins balances after years of stronger performance from propylene, he said.

Consumer debt was likely to constrain demand outlooks for all olefins derivatives that had applications in consumer products and packaging, Hensman said.

“Any feedstock advantage over the basic positioning [that naphtha economics would continue to set pricing levels] will help individual units survive through the downturn,” he concluded.

The 5th ICIS World Olefins Conference takes place in Brussels on 3 March 2010.

For more on ethylene and other olefins, visit ICIS chemical intelligence
Read Paul Hodges’ Chemicals and the Economy blog
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