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Ethylene demand weak as eurozone flirts with recession and deflation

Economic growth
By Paul Hodges on 19-Nov-2013

C2 OR Nov13So this is as good as it gets in 2013.  That seems to be the sad conclusion from analysis of Q3 operating rate (OR%) data for Europe’s crackers.  Actual Q3 OR% inched up to 81%, which was slightly better than 2012’s 80% rate and 2009’s 79% rate.  But its a very long way from the 90%+ level that used to be considered ‘normal’.

Equally, as the chart shows, overall performance January – September was worse:

  • 2013 OR% so far has been just 79% (red square)
  • This was only just above 2009’s 77% (green)
  • Total ethylene volume so far this year is 14.1MT, just 23kt above 2009 levels

We already know that Q4 will see no recovery.  Dow have announced the temporary closure of their Tarragona cracker in Spain from 1 December because of “challenging market conditions and an unclear demand picture”.  Whilst ICIS polymer expert Linda Naylor noted “this is not the end of the year that many players had envisaged”.

It thus appears markets are indeed following the path forecast by the blog at the beginning of Q4:

  • “Base chemical demand has broadly fallen from peak levels in Q3 
  • “Most chemical buyers built inventory in Sept. because they thought Syrian issues would take oil prices higher
  • “Wiser counsels prevailed over Syria, however, but buyers have no need to buy further volumes in October
  • “November is also likely to be weak as Q3 inventory is worked down
  • “December will see the usual low volumes, as everyone looks to de-stock inventory into year-end”

The other worry is that the Eurozone seems to be slipping back into recession, whilst deflation is looming.  2014 could be a very tricky period indeed.