25 October 2013 10:57 [Source: ICIS news]
LONDON (ICIS)--The closure of INEOS’s petrochemical complex in Grangemouth, the UK, will not reverse the negative trend in the European ethylene sector, credit ratings agency Moody's said on Friday.
“While the closure of the Grangemouth cracker would be very significant for the industry, we do not expect it would be enough to recover sector-wide utilization rates which have been languishing in the low 80s percentage range,” Moody’s said.
“This is a sustained negative credit trend for the European ethylene industry and we do not think it will reverse soon,” it added.
Switzerland-based INEOS earlier on 23 October confirmed the Grangemouth petrochemicals complex it operates will remain closed after being shut down early last week in preparation for anticipated industrial action, adding that liquidators will be appointed within a week.
The site in Grangemouth is one of Europe's largest ethylene cracker facilities and has the capacity to produce 1.02m tonnes/year of ethylene, which Moody’s said is approximately 4% of total European capacity and one-third of INEOS’s European capacity.
“The European ethylene sector is struggling with overcapacity and growing international competition, exacerbated by the European producers’ cost disadvantage. In Europe, ethylene producers predominantly use higher-priced naphtha feedstock, while competitors in the Middle East and North America use cheap ethane,” Moody’s said.
“The divergence in feedstock costs accounts for the much lower profitability of European crackers. We expect US prices for ethane and related feedstocks to remain at or around present low levels for the next several years, and for European feedstocks to remain severely disadvantaged and generate weak profitability.
“We also expect that exports into Europe from the Middle East and North America will increase, putting further pressure on European cracker operating rates,” it added.
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