European EO set to tighten due to spate of turnarounds in May/June

07 May 2010 16:49  [Source: ICIS news]

LONDON (ICIS news)--European ethylene oxide (EO) supply is short and is set to tighten further in June, mainly because of a heavy turnaround schedule, sources said on Friday.

The good momentum in demand, particularly in the downstream surfactants sector, was also exacerbating the short supply situation, said buyers and sellers.

“Spot availability in May is limited, but there is going to be a massive problem in June, when there are no spot volumes available,” said one EO customer.

Both buyers and sellers agreed the spot market would be more or less dry in June.

One manufacturer said: “We have [the] impression supply is pretty much capped towards end of May and during [the] month of June. We cannot supply all [that customers had forecast] for June.”

One customer had previously said it had been asked to provide longer and more detailed EO forecasts to cover the turnaround period, but stressed its contracts were sufficiently covered.

The maintenance spanning over May and June included one of Clariant’s units in Gendorf, Germany, that was to go down for around two weeks in May. The site has a total capacity of 225,000 tonnes/year of EO and 240,000 tonnes/year of monoethylene glycol (MEG).

BASF’s EO facility in Ludwigshafen, Germany, was scheduled to enter into a planned maintenance turnaround at the end of May that would last for three weeks. The unit has a nameplate capacity for EO of 295,000 tonnes/year, according to ICIS plants and projects database.

In mid-June planned maintenance is due to take place at INEOS’ EO/MEG plant at Cologne, Germany, which is anticipated to last around three weeks. The site has production capabilities of 290,000 tonnes/year of EO and 175,000 tonnes/year of MEG, according to ICIS data.

Also around the middle of June, Shell’s EO/MEG operations at Moerdjik, the Netherlands was expected to go down for maintenance of around 24 days. The facility is estimated to manufacture 305,000 tonnes/year of EO and 160,000 tonnes/year of MEG.

PKN Orlen’s EO/MEG facility at Plock, Poland was preparing for its 60-day catalyst change due to start in June, according to a company source. The seller had previously said after the overhaul the unit will have a nameplate capacity of around 30,000 tonnes/year of EO and 80,000 tonnes/year of MEG.

One buyer said although there will be reduced EO output in June, it was hopeful the start of the summer holidays and the onset of low season in the downstream agro-chemical sector would counterbalance the supply limitations.

However, another customer said this was “just clutching at straws" and it did not expect a summer holiday dip in demand to start as early as June. The source added it was taking counter-measures by trying to book some volumes early and move some of its production forward from June to May.

Sources said EO spot and freely negotiated volumes would be at a premium over formula levels in May and June, although in light of the scarcity of product it remained to be seen whether this premium would turn out to be merely hypothetical.

“Price is irrelevant as there are no volumes available for spot,” said one customer.

One manufacturer said it had targeted increases of €50/tonne ($63/tonne) for spot volumes in May and had achieved plus €35-40/tonne over April. One customer, however, said it considered plus €20/tonne to be more realistic.

Formula contracts reportedly rolled over in May due to ethylene feedstock price stability, although the picture for freely negotiated business in May was not yet clear.

In April, European EO contract prices were assessed between €1,080-1,136/tonne FD (free delivered) NWE (northwest Europe) and €1,120-1,166/tonne FD MED (Mediterranean), according to global chemical market intelligence service ICIS pricing

The MEG market was devoid of imports. Downstream demand  from the antifreeze sector in preparation for next season was yet to kick in and polyethylene terephthalate (PET) was running well, but mostly off contract volumes.

As a result spot MEG bulk prices were relatively stable below €750/tonne CIF (cost, insurance and freight) NWE. The May contract price had fallen by €14/tonne to €856/tonne FD NWE.

Downstream, the globally short supply of EO was also impacting the availability of ethanolamines, some sellers said.

This was partly why one producer posted price increases in May for mono-ethanolamine (MEA) and tri-ethanolamine (TEA) of plus €30/tonne, though there were also reports of a rollover from some suppliers. April contract prices for MEA were assessed at €1,100-1,160/tonne FD NWE, whileTEA was pegged at €1,300-1,350/tonne FD NWE.

BASF was preparing for planned outages at its 110,000 tonne/year ethanolamines unit in Antwerp, Belgium, followed by a shutdown at its 130,000 tonne/year plant in Ludwigshafen, Germany. These were also scheduled to take place in the second half of May or in June.

Additional reporting by Caroline Howard and Jane Massingham


For more on EO and MEG visit ICIS chemical intelligence
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By: Heidi Finch
+44 20 8652 3214

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