US shale gas will keep Westlake Chemical competitive – CEO

03 November 2010 16:20  [Source: ICIS news]

TORONTO (ICIS)--Increased ethane availability from rising US shale gas production will keep Westlake Chemical cost competitive in coming years, CEO Albert Chao said on Wednesday.

Chao would not rule out that US industry participants could announce - within the next year or so - ethylene capacity expansions or debottlenecking measures as producers benefited from the low-cost ethane feedstock, he said.

“[US shale gas] will continue to provide abundant supplies of natural gas and natural gas liquids, which has given ethane-based ethylene production a cost advantage over naphtha-based production,” Chao told analysts during Westlake’s third-quarter results conference call.

“This cost advantage continues to benefit Westlake and other North American producers, and has kept the North American industry globally competitive,” he said.

Chief financial officer Steven Bender added that US ethane market prices fell 27% since the 2009 fourth quarter. Meanwhile, rising global demand for polyethylene (PE) pushed up prices and operating rates, he said.

Earlier on Wednesday, Westlake reported that third-quarter net income more than doubled to $62.7m (€44.5m). Income from operation in Westlake’s core olefins business was $136.1m, up more than double from $61.7m in the 2009 third quarter.

Analysts at New York-based equity research firm Alembic Global Advisors said Westlake had “blow-out quarter,” driven by its olefins segment.

However, Westlake’s vinyls segment continued to be a drag on results due to continued weakness in the construction markets and the industry’s inability to raise prices for polyvinyl chloride (PVC) resin and other downstream fabricated products sufficiently to offset propane and energy cost increases, Alembic said in a research note.

($1 = €0.71)

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By: Stefan Baumgarten
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