Tight supplies, C3 spread help drive Eastman earnings – CEO

29 April 2011 19:50  [Source: ICIS news]

HOUSTON (ICIS)--Tight market supplies and a high propane-to-propylene (C3) price spread continue to boost US-based Eastman Chemical’s earnings, CEO Jim Rogers said on Friday.

Eastman benefits from the spread between propane and propylene as propylene prices continue to rise, he said. The company can crack propane to produce low-cost propylene.

In the three months ended 31 March, Eastman benefited from this spread as propylene prices increased 15% year on year from the 2010 first quarter and 30% sequentially from the 2010 fourth quarter - much more than many in the market had expected, he said.

“The main driver is the fact that supply [in chemical markets] is tight,” Rogers told analysts during Eastman’s first-quarter results conference call.

“I can’t think of any market that you would consider 'loose’, and I think that’s probably a trend that the whole industry will be seeing for some time,” Rogers said.

“I think it has a lot to do with how bad the downturn was”, as this deterred chemical producers to invest in new capacities, he added.

While there have been many announcements for US chemical plants in recent months, it would take some time before the new production comes on stream, Rogers said.

The restart of Eastman's previously idled cracking unit in Longview, Texas, at the end of last year has also contributed to the company's performance, he said.

Furthermore, Eastman continues to benefit from using coal as a feedstock for chemical production, even though the coal-to-natural gas spread is no longer “extraordinary”, given the US shale gas finds, Rogers said.

Meanwhile, Eastman expects to make two or three small- to medium-sized acquisitions this year, Rogers said without disclosing details.

On Thursday, Eastman Chemical reported that its 2011 first-quarter net income more than doubled year on year to $220m (€147m) on improved performance in all business segments.

($1 = €0.67)

For more on Eastman and other producers visit ICIS company intelligence

By: Stefan Baumgarten
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