Margins lifted at most crackers in 2011 despite year-end slump

09 January 2012 16:49  [Source: ICIS news]

A US crackerLONDON (ICIS)--Cracker margins are under pressure at the start of 2012 but producers in Europe and the US made healthy margin gains through 2011 as a whole, ICIS data showed on Monday.

Ethylene variable margins (margins not taking into account fixed costs) for producers in Asia using naphtha as a feedstock remained weak at the start of 2012.

Northeast Asia ethylene margins were barely positive while margins for naphtha-based producers in southeast Asia had turned negative.

Northeast Asia cracker margins in 2011 were down 30% compared with 2010, the ICIS data showed.

In the fourth quarter, cracker margins in northeast Asia were their lowest since the first quarter of 2009 with that performance helping drag down the annual average.

In Europe, however, firmer monthly ethylene contract prices and higher co-product prices in the first half of the year helped push the annual average naphtha cracker margin higher.

Annual average 2011 contract naphtha-based ethylene margins were 26% higher year on year and the highest since 2008.

Margins for the first week in January, however, were sharply lower. Naphtha costs were high and the weakness of the euro against the US dollar hit producer margins, despite higher monthly ethylene and co-product prices.

US producers continue to benefit from low ethane feedstock price, the data show.

Margins have contracted on higher ethane feedstock costs but ethane cracker contract margins were up 14% year on year in 2011 and some of the best since 2000.

Naphtha contract margins in the US for the year were 25% higher than in 2010 and, boosted by strong co-product credits, the highest since 2006.

But those cracking ethane to produce ethylene in 2011 benefited from a close to 9 cents/lb ($198/tonne) margin premium over their naphtha cracking counterparts.

($1 = €0.79)

Read John Richardson and Malini Hariharan's Asian Chemical Connections blog

Read Paul Hodges' Chemicals & The Economy blog

By: Nigel Davis
+44 20 8652 3214

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