High temperatures constrain European ethylene, propylene output

Source: ICIS News


LONDON (ICIS)--Persistently high temperatures across Europe are impacting on cracker and refinery operating rates, offsetting the relief provided by the restarts of the French and Portuguese crackers that had been on planned maintenance, sources said on Friday.

A few cracker operators said they had been obliged to reduce rates because of cooling water issues, storage issues and in some cases low Rhine water levels which has affected flows of product in and out of plants.

“In short, we are forced to reduce because of the hot weather, it’s getting serious now,” a source said.

The extent of the reductions is not clear however, with sources unwilling to disclose the percentage changes.

The heat-related operating constraints have come on top of two restart delays, and at least three other production hiccups over the past two-three weeks.

Ethylene was widely expected to be in a balanced to long, if not lengthy position during the summer months, but the various issues have trimmed any potential surpluses and resulted in a currently more balanced supply and demand position.

Propylene supply has veered from balanced to tight to very tight for most of the year, but the outlook for the summer months was for some easing in supply as planned maintenance was completed while derivative maintenance was still under way.

However, heat constraints have already been affecting refinery output for some time.

As crackers have been impacted, so will derivatives’ production, making harder to determine what the net impact on the wider market will be.

The spot markets are quiet, partly down to holiday absences and the start of the contract reference price negotiations.

Players have referred to swaps activities rather than outright trade as many have adopted a more cautious approach as they manage their balances.

Some feel that activity will pick up again once the August contract price outcomes are clear.

“Some players are holding off, waiting for the contract price to settle,” a second source said.

“We have small [propylene] volumes available, and there is buy interest,” a third source said.

From a pricing point of view, and with a lack of trade to suggest otherwise, both ethylene and propylene spot levels look to have remained steady week on week.

Against the prevailing contract reference price, polymer grade propylene is still pegged at mid-to-high single-digit premiums, with ethylene still commanding low double-digit discounts.

Picture source: Grant Falvey/LNP/REX/Shutterstock 

Focus article by Nel Weddle

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