Corrected: EU's carbon rules may help close 10% of cracker capacity - Cefic

07 December 2010 16:31  [Source: ICIS news]

Correction: In the ICIS story headlined "EU's carbon rules may help close 10% of cracker capacity - Cefic" dated 7 December 2010, please read in the fourth paragraph ...average manufacturing cost of $800-900/tonne compared with $200-300/tonne... instead of ...average manufacturing cost of €1,200/tonne compared with €300-400/tonne.... A corrected story follows.  

BRUSSELS (ICIS)--The EU's Emissions Trading System (ETS) may cause or accelerate the closure of almost 10% of Europe’s ethylene cracker capacity over the next five years, an executive with trade group Cefic said on Tuesday.

The additional costs of purchasing permits to emit carbon dioxide will push marginal producers into an uncompetitive position, causing widespread closures of around 2.2m tonnes out of a total of around 25m tonnes/year of ethylene production capacity, according to Pierre de Kettenis, executive director for petrochemicals at Cefic and secretary general of the Association of Petrochemical Producers in Europe (APPE).

APPE has generated this figure by assuming a cost of €30/tonne ($40/tonne) is added to pay for carbon dioxide emissions. This will be enough to push many European chemical producers into the red, Kettenis told ICIS on the sidelines of the Cefic economic outlook conference.

Manufacturers here are already burdened by an average manufacturing cost of $800-900/tonne compared with $200-300/tonne in the Middle East, he said.

Small units of less than 300,000 tonnes/year capacity and which are more than 35 years old are the most vulnerable, and non-integrated units with poor investment in energy recovery are also at risk, he added.

“Integrated units allow you to recover energy and that is fundamental to profitability because energy costs are close to 40% of production costs,” he said.

“This capacity would close anyway but the ETS will accelerate this.”

Around 600,000 tonnes/year of capacity has closed in Europe each year during this economic crisis “and will not reopen”, said Kettenis.

Debottlenecking of more efficient plants could help fill the gap left by smaller closures, and help to push operating rates over 87% to provide a good level of profitability, he said.

But prospects are not good for a completely new cracker in Europe: “A new cracker would need to be at least 1m tonnes/year in capacity and owned by 2-3 operators. This is unlikely unless we see strong economic recovery."

Kettenis said Europe lacks a coherent industrial policy to encourage investors to take on the huge investments required for a new cracker.

There are 52 crackers in Europe and 140 worldwide, according to Kettenis. 

($1 = €0.75)

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By: Will Beacham
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