China's Sinopec trims cracker rates on diesel crunch, weak demand

02 November 2011 03:30  [Source: ICIS news]

SINGAPORE (ICIS)--China’s Sinopec has trimmed the operating rate at its naphtha crackers this month because of tight diesel supply and weak market conditions in the derivative polymer markets, a company source said on Wednesday.

The operating rate was reduced to around 90% in November from an average run rate of 95% in October, said the source, but he declined to elaborate on details.

Sinopec operates 13 crackers either on its own or through joint ventures.

The company is producing more diesel at the expense of light distillates, such as gasoline and naphtha, to ease the supply shortage in the Chinese market. State-owned PetroChina had also said earlier on that it has increased the volume of diesel it is importing and producing to help out.

A diesel shortage has been spreading across China since mid September, as supply fails to catch up increasing demand, industry sources said.

Meanwhile, Sinopec's move to cut its ethylene output this month was largely in line with measures taken by most naphtha cracker operators in Asia, as margins are getting squeezed.

Crackers in Japan, Taiwan and parts of southeast Asia are mainly running at reduced rates of 80-90% in October, while there are also talks of impending rate cuts at crackers in South Korea this month. Korean naphtha cracker operators were generally running their ethylene plants at full steam in October.

“(Cracker) economics are still pretty poor,” said a regional olefins trader. “Downstream products are still weak, and customers are saying their own product prices are still falling,” he added.

Additional reporting by Angie Li

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