Europe olefins impacted by unplanned cracker, derivative issues

07 May 2010 15:14  [Source: ICIS news]

LONDON (ICIS news)--European olefins markets are being impacted by a raft of unplanned cracker and derivative issues, driving ethylene (C2) and propylene (C3) markets in opposite directions, market sources said on Friday.

Sources said cracker reductions were in force at Priolo, Italy; Tarragona, Spain; Carling, France; Cologne, Germany; and in the UK at Grangemouth. However, none were officially confirmed by the companies concerned.

Borealis’ CEO Mark Garratt told ICIS on Thursday its cracker at Porvoo in Finland was running at reduced rates due to a furnace issue. The cracker has a capacity to produce 380,000 tonnes/year ethylene and 220,000 tonnes/year propylene.

Dow Chemical’s No 2 cracker at Terneuzen in the Netherlands was out of action after having tripped on 5 May. The cracker, one of three operated by Dow at the site, has the capacity to produce 590,000 tonnes/year ethylene and 295,000 tonnes/year propylene, according to ICIS plants and projects data.

Dow recently had some production difficulties at its Tarragona, Spain cracker, due to a feedstock constraint, but this was now running at full rates “more or less”, according to a company source.

Scheduled maintenance was still under way at its cracker at Boehlen in Germany and a restart was not due for another two to three weeks.

LyondellBasell’s Berre, France cracker was still running at reduced rates following its restart after planned maintenance a week or so ago. Its butadiene (BD) force majeure had been extended into May because of feedstock crude C4 constraints, a company source said.

Ethylene supply was now tight for May, sources said. This was contrary to earlier market expectations that supply would be long as cracker rates were high and scheduled maintenances almost at an end for the spring season.

The shipping of up to five cargoes out of northwest Europe and the Mediterranean primarily to the US Gulf in April meant there was little to no “buffer zone” to allow for unexpected events.

“If there are some [production] hiccups, immediately there is a reaction because there is nothing in the pipeline,” an integrated producer said.

“[We] got lots of [ethylene] enquiries this week, more than ever in my trading history,” a trader said.

Spot prices were being pegged at €875/tonne ($1,108/tonne) FD (free delivered) NWE (northwest Europe) on the pipeline and at around €870-890/tonne delivered at the coast, according to global market intelligence service ICIS pricing.

Conversely, propylene was still showing signs of easing despite reduced cracker running rates, because some producers had earlier experienced derivative problems that had freed up propylene. This was exacerbated further by Total’s force majeure declaration on polypropylene (PP) production in Belgium on Thursday.

However, some sources thought reduced cracker output would be offset by lower demand due to derivative issues.

Sources talked of congestion building at certain ports and at some sites inland. Two or three May loading cargoes from the US Gulf and Venezuela had been mooted to be destined for Europe, but even last week, sources reported there was little appetite for all the volume and as such at least one of the cargoes was being re-routed to Asia.

Propylene spot prices were recently assessed at around €1,000/tonne CIF (cost insurance freight) NWE or below.

Apart from the uncertainties surrounding supply, the softening of the Euro against the US dollar as a result of the Greek financial crisis meant market participants were also unwilling or simply unable to take any trading risks.

Ethylene was available from the Middle East and Mexico, but product from these regions was also dollar-priced and a weakening euro negated any potential gains from firming ethylene spot levels in Europe.

US ethylene values had weakened significantly in recent weeks, prompting speculation whether this would make US cargoes economically viable for European buyers.

“They [the US] would not be able to offer below €900/tonne [CIF (cost insurance freight)]” a trader said, but added “with the euro becoming as reliable as the Zimbabwe dollar, it’s also not really helpful to import.”

$1 = €0.79

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By: Nel Weddle
+44 20 8652 3214

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