24 May 2012 05:21 [Source: ICIS news]
By Peh Soo Hwee
“Margins are negative so we have to cut production,” said a source from
“If the other Korean cracker operators also cut their production, we might see some impact on the market but the global economic situation is bad especially the European political situation, which is risky,” he added.
YNCC said earlier this week that it planned to cut the operating rates across its three naphtha crackers in Yeosu to 90% in end-May due to squeezed margins.
The company is currently running the three crackers, which have a combined ethylene nameplate capacity of 1.9 m tonnes/year, at full rates.
Market sources said that the last time YNCC had cut the cracker operating rates was during the global financial crisis in late 2008, which indicates the gravity of the current market situation.
“The Korean suppliers are usually the last to reduce their operating rates,” said a Japanese olefins trader.
Other producers in the region have also announced cuts, notably
SK Energy also reduced the operating rate at its 190,000 tonne/year naphtha cracker to 70% capacity on 20 May from 85% earlier this month while Indonesia’s sole cracker operator Chandra Asri has cut production at its 600,000 tonne/year naphtha cracker in Cilegon to 90% capacity in May from 95% in April, sources from both companies said.
Ethylene margins based in northeast
The margins slipped $8/tonne to $119/tonne during the week ended 18 May, according to data from ICIS.
The olefins markets have come under pressure mainly because of the poor performance of key derivatives such as polyethylene (PE) and polypropylene (PP), which account for more than 60% of the ethylene and propylene consumption in
“The correction is largely because of weak demand,” a source from FPCC said.
As such, integrated producers in the region have been selling ethylene and propylene spot cargoes and keeping derivative polymer plants running at reduced rates.
This is because the prices of PE and PP had weakened over the past month amid poor domestic demand in
PE and PP are important raw materials for the manufacture of plastics that go into end-products ranging from home appliances to cars.
Ethylene and propylene spot prices are currently hovering at near five-month lows but buyers said they would not be so easily drawn to buying cargoes because of the uncertain outlook.
“It is not clear when the market will bottom out,” said a Chinese vinyls producer who is a regular importer of ethylene.
At noon, ethylene spot prices were assessed down $30-40/tonne at $1,050-1,100/tonne CFR NE Asia while propylene edged $10/tonne higher at the top end of the range to $1,270-1,300/tonne CFR NE Asia, according to ICIS.
($1 = €0.80)
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