OUTLOOK ’12: Turnarounds, crude oil may fuel US olefins prices

27 December 2011 16:34  [Source: ICIS news]

A US crackerHOUSTON (ICIS)--A series of planned cracker shutdowns in the first half of 2012, combined with potentially higher energy prices, are likely to lend support to US olefins prices, even though the monomer was trending down at the end of the year.

The potential rebound also stems from expectations that demand for chemicals may strengthen in the first quarter, after a softening seen in most markets during the last three months of 2011.

Undoubtedly, the planned stoppages are the main factor that could influence prices next year.

The New Year will start with at least one unit being taken off line for maintenance, the first of seven that will have a turnaround in the first half of 2012.

According to sources, ExxonMobil will start the maintenance spree with a shutdown at its Baytown complex in Texas, where the company has two crackers with a combined ethylene capacity of 2.2m tonnes/year.

It is unclear if ExxonMobil will shut one or both units. The company does not comment on its operations. The turnaround will last 45 days, according to a consultant.

Other producers with scheduled maintenance in the first half include BASF, which has a 934,000 tonne/year cracker in Port Arthur, Texas, and INEOS, which has two crackers with a combined 1.8m tonnes/year of capacity in Chocolate Bayou, also Texas.

Dow Chemical, LyondellBasell and Chevron Phillips Chemical are all said to also have planned maintenance in the first half. Flint Hills Resources (FHR) and Westlake are planning shutdowns for later in the year.

While planned turnarounds are not automatic triggers for higher prices, they leave little room for other disruptions. In 2011, unplanned shutdowns wreaked havoc in the US ethylene market, particularly in the first half, when 25 cracker outages were tallied.

With the US ethylene market remaining finely balanced, a repeat of those outages in 2012 – even half of them - could significantly tighten spot supply and consequently push contract prices higher.

The same goes for propylene, although supply on that side of the market seems looser when compared with ethylene. Still, the turnarounds next year could also impact propylene as some of the units being shut down run on heavier feeds. The BASF cracker, which will go down in April for 50 days, is a 100% naphtha cracker.

Propylene also tends to be more susceptible than ethylene to changes in crude oil prices, which gained strength in the fourth quarter despite a sluggish economy and a drop in other commodity prices.

Last but not least is butadiene (BD), the price of which plummeted by 44% in August-December 2011, but whose outlook also seems to point to a recovery next year because of increased demand.

BD demand may strengthen in 2012 as a result of capacity expansions in the tyre sector, market participants said, also citing potentially tighter supply because of the cracker turnarounds in the US next year.

For more on ethylene, propylene and BD visit ICIS chemicals intelligence
For more on US ethylene, propylene and BD facilities visit ICIS plants and projects


By: William Lemos
+1 713 525 2653



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