01 April 2010 07:59 [Source: ICIS news]
By Chow Bee Lin
SINGAPORE (ICIS news)--Polyethylene (PE) producers in Asia are bracing for thinner margins in the second half of 2010 due to fierce competition from cost competitive Middle East supplies and high crude oil prices, industry sources said on Thursday.
"We still have some margins now but I’m concerned about what’ll happen in the second half of the year. It really depends on whether gas-based producers in the Middle East will flood the Asian market with cheaper material,” a naphtha-based PE producer in southeast (SE) ?xml:namespace>
PE margins had been on the decline since hitting a four-month peak of $464/tonne (€343/tonne) and $487/tonne in February, for northeast (NE) Asia and southeast (SE) Asia respectively, said Larry Tan, ICIS Manager for Data & Analytics.
"Margins for crackers and PE plants in
Integrated PE producers’ margins were estimated at $413/tonne in northeast Asia for the week ended 26 March, said Tan, calculated based on key variable costs, co-product credits and product yields, and the average value of injection grade high density PE (HDPE).
About 4.7m tonnes/year of PE capacities were expected to start up in Asia and the
Furthermore, around 9.5m tonnes of new ethylene capacity was expected to come on stream in Asia and the
"Naphtha cracker margins were more compressed than the ethylene-to-PE chain in the last industry downturn in the early 2000s. It remains to be seen if the same would occur in the second half this year,” said Tan.
The SE Asian naphtha-based PE producer said he feared that PE margins might bear the brunt of the impact when the industry faced its next downturn due to a less favourable demand-supply dynamics.
"Back in the early 2000s, naphtha crackers were running below 85% capacity due to a long ethylene supply, global PE operating rates were on average above 85% and most importantly, the
To avoid head-on competition with lower-priced Middle East material, some naphtha-based PE producers in NE Asia had switched to grades that are not so widely produced in the
"The new Middle East plants have been exporting mainly film, injection and blow moulding grades HDPE to
($1 = €0.74)
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