FocusKorea, Japan BTX makers run at low op rate

03 March 2008 05:10  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--As the high price of naphtha narrows production margins, key aromatics makers in South Korea and Japan are forced to maintain low operating rates of around 70-80%, company sources said on Monday.

Majors including Nippon Oil, Japan Energy, and GS Caltex have been forced to lower production levels or shutdown some units in the past few months due to the sustained rally in crude and naphtha values.

“The economics is not so good at present, and our total production level is 80-90%,” a company source with Nippon Oil said.

One of the largest producers of benzene in Asia, Nippon Oil has plants at six locations across Japan and a total nameplate capacity for benzene is 1.17m tonnes/year.

Japan Energy also cut operating rates at its Chita-based aromatics unit from early 2008 due to high feedstock naphtha prices, a company source said.

The company produces 200,000 tonnes/year of benzene, 200,000 tonnes/year of toluene and 250,000 tonnes/year of isomer grade xylene, which is meant for captive use at its 380,000 tonne/year paraxylene (PX) plant.

“Due to economic reasons, we had to reduce operating rates to 60-70%,” the source said.

Despite a wide enough price spread between naphtha and benzene, margins were not covered fully due to the narrow gap between toluene and mixed xylenes’ prices, he said.

The spread from naphtha to benzene was calculated at $183-192/tonne (€121-127/tonne), with toluene at $58-72/tonne and with isomer grade xylene at $68-87/tonne.

The average of the spread between naphtha and benzene, toluene and mixed xylenes (BTX) was at about $110/tonne, below the estimated $130-140/tonne required to breakeven.

On Friday, naphtha values were assessed at $902-903/tonne CFR (cost and freight) Japan, a few dollars shy of the record high reached earlier in the week.

South Korean major, GS Caltex had also shutdown one of its toluene disproportionation (TDP) units and a small reformer earlier this year, said a source close to the company.

Poor economics has also led the company to shutdown its TDP unit from December-January and the reformer from January. The units were likely to remain offline until May, he added.

Due to the unplanned shutdowns, the company’s inventory level for one of the products was low. There was limited spot availability, with only enough produced for meeting term commitments, the source said.

The toluene to benzene spread was at $115-120/tonne while the spread with isomer grade xylene was $10-15/tonne, well below the estimated $150/tonne to breakeven.

On Monday, benzene prices were at $1,080-1,090/tonne FOB (free on board) Korea, toluene prices at $960-975/tonne FOB Korea and isomer grade prices at $970-990/tonne FOB Korea, according to global chemical market intelligence service ICIS pricing.

($1 = €0.66)

ICIS Copyright © Reed Business Information 2009

Author: Mahua Chakravarty
+65 6780 4359

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