US Eastman to cut ethylene production ‘dramatically’

HOUSTON (ICIS)–Eastman Chemical is reducing production of excess ethylene at its site in Longview, Texas, dramatically, CEO Mark Costa told analysts during the company’s Q2 earnings call on Friday.

“We have taken steps to significantly reduce the excess ethylene we produce, for both this year and next,” Costa said.

Eastman is configuring its crackers at reduced ethylene production while maximising propane feed to maximise propylene production, he said.

As a result, Eastman’s ethylene spot sales will already be limited in the second half of 2018, he said.

In 2019, Eastman will make a “modest investment” in its cracker flexibility to include refinery-grade propylene (RGP) in the feedstock slate, enabling it to ramp up polymer-grade propylene production, “while dramatically reducing both our ethylene production, as well as our propane purchases, which minimises Eastman’s exposure to spot ethylene sales”, the CEO said.

When ethylene market conditions improve and pricing becomes more attractive, Eastman retains the flexibility to switch back to producing more ethylene, he said.

He added that once new US ethylene export capacity comes online around 2020, ethylene prices “probably will be attractive again”.

Meanwhile, current market conditions, combined with the geopolitical and trade environment, made it “very difficult” for Eastman to find partners and move forward with long-running plans to monetise the excess ethylene capacity assets at Longview, chief financial officer Curt Espeland said.