Faced with a make-or-buy situation, Huntsman Corp. has chosen to restart 400 million pounds of idled ethylene capacity at its Port Neches, Tex., facility. The unit is expected to be on stream in the second half of 2004.
“We are in the final planning and preparation stages,” notes James Huntsman, vice president of petrochemicals for Huntsman. “We expect the unit to be on line by the end of the third quarter or early fourth quarter.”
When the company idled the unit in 2001, it was able secure ethylene at acceptable prices, but that is no longer the case, according to Mr. Huntsman.
“We believe Huntsman could be negotiating new ethylene supply contracts, and ethylene supplier offers have become significantly more expensive,” notes Jeffrey Zekauskas, analyst with JPMorgan. “We attribute this development to tightening ethylene fundamentals in general as well as increased confidence by suppliers on the near-term outlook.”
Mr. Zekauskas sees a cyclical upturn in ethylene-chain margins coming in the next 12 to 18 months. “We look for a durable upcycle to begin in 2005 and extend for several years, as new Arab Gulf and Chinese production is absorbed by global market growth at 4 percent trendline rates,” he says. “Absent further restructuring, North American industry utilization rates could approach the high 80 percent [range] during 2004 versus the low 80 percent [range] in 2002 before rising above 90 percent in 2005.”
The analyst says the restart is noteworthy because it involves ethylene capacity running solely on ethane. However, Mr. Huntsman notes that while ethane will provide a majority of the feedslate, a portion of the feed will be off-gas from local refineries.