OUTLOOK ’14: Asia ethylene may firm on tighter supply, new demand

30 December 2013 03:27  [Source: ICIS news]

By Yeow Pei Lin

SINGAPORE (ICIS)--Asian ethylene prices are likely to draw support from tighter supply  in the first half of 2014 amid a heavy cracker turnaround schedule in Japan and new downstream operations in South Korea and China, market players said.

The Middle East, however, is the wild card in the overall demand-supply picture, they added.

Six Japanese naphtha crackers will be shut for maintenance between February and June, compared with two plant shutdowns in Japan during the same period this year. (Please see a table of 2014 Asia/Middle East cracker shutdown schedule below).

Some of these producers have ramped up production since November to help their downstream units build up stocks for the upcoming turnarounds at their integrated petrochemical complexes.

“We are likely to have no spot cargoes to sell up till May,’’ said a Japanese producer who will shut its cracker in the first quarter of 2014.

Several other Japanese producers shared a similar supply outlook as they will give priority to their downstream affiliates and term customers.

Exports from South Korea – another key regional supplier – are expected to fall from the first half of 2014 because of increased downstream domestic demand.

Two South Korean producers will likely become net buyers by mid-year if their downstream plants commence operations as planned and if the market conditions allow these facilities to run at high rates.

Samsung Total is expected to start up its 240,000 tonne/year ethylene vinyl acetate (EVA) unit in Daesan in February.

Fellow producer SK Energy will have a metallocene linear low density (MLLDPE)/elastomer/plastomer swing plant in Ulsan, South Korea in April or May, a source close to the company said. The plant can produce up to around 230,000 tonnes/year of MLLDPE.

The company will also resume operations at its 300,000 tonne/year styrene monomer (SM) plant in Ulsan in the second quarter of 2014. The facility, which was previously owned by BASF, was idled since 2008.

“SK may become a net buyer from the second half of 2014 if the market conditions allow them to run their downstream units at high rates,” a source close to the company said.

Several producers in South Korea have opted either not to renew their term contracts or to reduce their export volumes next year in order to meet the higher domestic demand from their own downstream affiliates and fellow South Korean producers with new captive consumption.

The expected tightening in regional supply has led sellers to raise their asking prices substantially for 2014 term cargoes to customers in markets such as China.

Several buyers, however, said they are unable to accept the increased offers and this has slowed down the progress of their negotiations.

“Discussions may drag on till January, given the large price gap,” said a Chinese end-user.

The buyer, like others in a similar situation, is considering securing ethylene from the spot market in order to cover a portion of their requirements that was originally intended to be covered by the new 2014 term contract.

Spot demand for shipments delivering in early 2014 to the leading China market was also bolstered by reduced production at certain domestic facilities.

Sinopec Shanghai Petrochemical has permanently shut its 150,000 tonne/year cracker at Jinshan on 25 November due to weak economics, while feedstock naphtha shortage following an explosion at an oil pipeline in Qingdao last month has led Sinopec’s joint venture company BASF-YPC (BYC) to cut the operating rates at its 740,000 tonne/year cracker at Nanjing in early December until possibly the second half of January 2014.

“Some buyers may have to import more ethylene, at least in early 2014, in order to balance their system,” a regional trader said.

A number of methanol-to-olefins (MTO) projects in China are expected to start up in 2014 but market sources said these added capacities will have limited impact on the country’s ethylene demand-supply balance as most of the projects have downstream units.

On the import demand front, sellers are hoping that the increased downstream capacities in China’s derivative ethylene oxide (EO) sector will help drive ethylene sales, market players said.

Oxiranchem and Zhejiang Yulong Petrochemical will each bring on stream next year a 200,000 tonne/year EO plant in Yangzhou and Taixing, respectively.

Buyers cautioned that any price increases in ethylene must be done at a sustainable pace, from the perspective of downstream margins.

“If ethylene prices go up too high, and we cannot reflect these increases in the pricing of our products, then we will have to cut production,” a Chinese end-user said.

The buyer, like many other Asian end-users, is hoping the recent deal struck by Iran to curb its nuclear programme in exchange for relief from international trade sanctions, could result in more Iran-origin ethylene becoming available next year.

Some Iranian sources, however, said the export volumes are unlikely to see a significant rise in the near term because of feedstock supply limitations and increased domestic demand.

Asian participants are also watching closely the progress of the Borouge 3 project in Ruwais, Abu Dhabi.

The project includes an ethane cracker, two Borstar polyethylene (PE) units, two Borstar polypropylene (PP) units and a low density polyethylene (LDPE) unit.

An official from Borealis, which has a stake in the joint venture with Abu Dhabi state-owned oil company ADNOC, had earlier said that the cracker was expected to start up by the first quarter of 2014, while the downstream facilities would start up progressively during 2014.

“Any delays in the start-up timing of the downstream facilities could potentially result in surplus ethylene (exports) to Asia,” a trader said.

2014 Asia cracker shutdown schedule

Month

Company

Location

Capacity (t)

Turnaround dates

Feb

Asahi Kasei

Mizushima, Japan

500,000

19 Feb to mid-Apr

CPC

Linyuan, Taiwan

720,000

Feb for at least two months

Mar

Showa Denko

Oita, Japan

690,000

13 Mar to 25 Apr

Tosoh

Yokkaichi, Japan

527,000

mid-Mar to mid-Apr

PTT Global Chemical

Map Ta Phut, Thailand

460,000 (I-1 cracker)

3 Feb for around 40 days

Shanghai SECCO

Jinshan, Shanghai, China

1.2m

H1 Mar for around 30-45 days

Apr

CPC

Kaohsiung, Taiwan

500,000

mid-Apr for around two months (TBC)

Ethylene Malaysia

Kerteh, Malaysia

400,000

most likely Q2 for around 50-60 days

Zhenhai Refining & Chem

Ningbo, Zhejiang, China

1m

Apr/May for around 30 days

Haldia Petrochemicals

Haldia

670,000

Apr for around 30-40 days

May

Keiyo Ethylene

Chiba, Japan

740,000

around 40 days

Jun

Mitsubishi Chemical

Kashima, Japan

489000 (+50000)

June for around 45 days

Mitsui Chemicals

Osaka, Japan

450,000

Q2/Q3 for 40-45 days

Aug

Panjin Ethylene

Panjin, Liaoning, China

180,000

around 30 days

Tonen Chemical

Kawasaki, Japan

515,000

around 30 days

Sep

YNCC

Yeosu, Korea

465,000

22 Sep to 26 Oct

Idemitsu Kosan

Tokuyama, Japan

623,000

at least one month

Formosa Petrochemical

Mailiao, Taiwan

1,200,000

usually 30-45 days

Yangzi Petrochemical

Nanjing, Jiangsu

650,000

Q3 for around 30 days

Oct

Shell

Bukom, Singapore

800,000

mid-Oct to mid-Jan 2015 (TBC)

Nov

LG Chem

Yeosu, Korea

1,000,000

around 30 days

Source: ICIS


By: Yeow Pei Lin



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