Europe 2019 cracker turnarounds in focus

The hefty scheduled cracker maintenance slate in the spring of 2019 is looming large and remains at the forefront of most European olefins players’ minds, several sources said on the sidelines of the 52nd annual European Petrochemical Association’s (EPCA’s) annual meeting in Vienna.

Preparations to cover these outages have been underway for some time.

A combination of swaps arrangements, planned derivative downtime and/or reductions, and increased offtake from other suppliers, have all been employed to help counter the impacts of the cracker turnarounds.Some consumers, especially on the propylene side, have taken steps to reduce spot exposure in general in 2019, and worked to increase the number of suppliers in their contractual portfolios.

SUPPLIER PRESSURE

This puts additional pressure 
on suppliers, the onus being 
on them to fulfil contractual obligations during the turnaround 
season.

Consequently there were still large gaps in some systems, a source said, and so import options to help counteract these difficulties continue to be examined.

US, Asian and Brazilian volumes could take on a more structural role in Europe imports in 2019.

Deep-sea propylene imports, at least up until now, have 
usually been seen as an ad hoc last resort to compensate for longer running outages, as lead times, logistical challenges 
and typically unattractive pricing have not been that conducive to trade.

However, many say that with propylene prices likely to increase and being more attractive to sellers, the general view is that more import volumes will be seen next year.

NEGOTIATIONS

Negotiations between various players are ongoing but most sources have been unwilling to disclose any details.

“It is difficult [to get commitment] as the short[ages] are not structural [as based on scheduled outages]. There will be periods when it is tight, and when it is not so tight,” another source said. “It is a challenge to find commitments just for three months.”

Sources also said they are working to overcome key obstacles relating to pricing as players had differing views, whether formula-based on price at origin, or based on values at destination, or fixed price, not to mention the usual challenges when it comes to logistics.

“People want imports but can’t match seller ideas,” a source said.

There are also question marks over availability. Views on Asian propylene supply are mixed, with some sources saying Asian volumes will likely stay in the region because of a generally tight supply and demand balance, but others expect good availability on slowing or cautious demand due to the US-China trade war.

In terms of US volumes, some question the operational reliability of the propane dehydrogenation (PDH) units, but there are also some whispers that sellers’ views on pricing terms may be a little more flexible than they were before.

Not all players are subscribing to the view that there will be as severe a drought in European propylene as many are predicting, given the extent of some preparations up and down the chain, and barring any unforeseen events on the production side.

“The proof of the pudding will be in the eating,” a player said.