Europe cracker closures to affect polymer production in first half 2017

LONDON (ICIS)–A series of planned cracker shutdowns in the first half of the year is expected to affect polyethylene (PE) and polypropylene (PP) output, according to market sources.

While dates of cracker outages were more or less widely known in the market, but mainly unconfirmed, PE and PP producers have been coy about giving details of shutdowns that are associated with the upstream outages.

Most of the information about the polymer outages comes from buyers who have been informed that there will be no supply interruptions for the most part, by their suppliers.

The main sticking point to supply could occur if cracker start-ups were delayed, and also for some potential propylene supply issues around April, said sources.

Planned cracker outages

Please note these cracker outages have not been fully confirmed by the producers involved.

“These shutdowns are well planned,” said a large PE buyer, which went on to say, however, that the start-up history of some of the plants slated for maintenance outages has not been particularly good.

Most buyers have been assured that contractual volumes will be covered, but that extra quantities will not be available.

That, and the lack of imports of some PE and PP grades that is now being felt in some markets, is leading to some nervousness over supply in the first half of the year.

Until now, there have been no supply issues, but some grades have been on the tight side.

C4 (butene based) linear low density polyethylene (LLDPE) and some high density polyethylene (HDPE) grades have been left tight by a lower volume of imports.

Europe needs HDPE imports to function efficiently, buyers and sellers agreed.

“Either Asian prices have to fall or Europe has to increase,” said a large buyer.

Europe was now a net importer of some HDPE grades as earlier permanent closures and natural growth meant the region was no longer able to fulfil all its domestic needs.

In the case of C4 LLDPE, Europe has been a large net importer for several years, and low prices in Europe have meant volumes have been sent to regions with better netbacks.

The most recent import data for these products is November, but sources said by January they were feeling the lack of imports in these grades.

The weak euro – one of the reasons European prices are low in global terms – has also led to an increase in exports, another reason some buyers feel nervous for the period during the closures.

In the PP market, sellers are very relaxed, expecting no length to interrupt what they expect to be a smooth first-half 2017.

PE buyers are not as convinced as their PP counterparts that sellers will have a clear run during the same period. They currently see no shortage of supply, in spite of having had to pay price hikes in January, along with PP buyers.

An increase, based on higher upstream costs, is widely expected for both monomer contracts in February, and these hikes are expected to exert more upward pressure in polymer markets next month.

PE and PP are used in packaging and the manufacture of household goods. PE is also used in agriculture, and PP in automotive.

Additional reporting by Nel Weddle