Europe 2011 ethylene, propylene volumes fall on Q4 production cuts

25 January 2012 13:30  [Source: ICIS news]

Naphtha cracker at sunsetLONDON (ICIS)--European ethylene and propylene production data released on Wednesday highlighted the difficulties the olefins industry faced in 2011, particularly in the fourth quarter when significant production cuts were necessary to counteract poor demand levels.

According to statistics from the Association of Petrochemical Producers in Europe (APPE), fourth-quarter ethylene production fell by 716,000 tonnes, or 14%, from the third quarter and was down by 12% compared with the fourth quarter of 2010.

For the whole of 2011, ethylene production was down by 3.6% year on year to 19.6m tonnes. Production peaked in the first quarter at 5.1m tonnes, falling in the second quarter in line with planned maintenance turnarounds, before recovering in the third quarter until its drop off in the final quarter of the year.

Ethylene production in 2011 was 10% below the industry’s peak production level in 2007. Some less economical cracker capacity has since been definitively shut in view of the significant capacity additions in the Middle East and Asia over the past couple of years, but this amounts to just over half a million tonnes of ethylene.

Propylene production in 2011 amounted to around 14.5m tonnes, down 3.7% compared with 2010, and 7.6% less than the 2007 industry peak. In 2011, propylene production was at its highest in the first and third quarters.

Fourth-quarter production of propylene in Europe slumped 12% to 3.3m tonnes from the third quarter, and was 10% less than the volumes produced in the fourth quarter of 2010.

The olefins industry was characterised by a significant drop in demand in the fourth quarter. Inventory positions were high and fears over a global recession and the eurozone debt crisis paralysed buying interest and players destocked heavily in the run up to the year end.

Cracker operators had no other option but to significantly reduce production rates. By December, crackers were running on average at 70% of capacity, although many were described as running at technical minimums. A couple of operators extended maintenance shutdowns and at least one other cracker was idled for market reasons. Poor margins meant that there was certainly no incentive to run hard.

Average cracker operating rates have since improved in January with some crackers operating at levels around 85-90%. Although demand is better than expected, players warn that structural recovery is weak and caution that the improvement stems from restocking and pre-buying ahead of expected cost-driven feedstock increases.

($1 = €0.77)

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By: Nel Weddle
+44 20 8652 3214

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