Operating rates firm at crackers across Europe on better than expected demand for C2, C3

13-Nov-09
Crackers across Europe have firmed run rates and are operating at 80-85% capacity on better than expected demand this month for ethylene (C2) and propylene (C3) as per ICIS. Most maintenance and economic closures at the various crackers across Europe are expected to be complete towards year-end. Hence this was expected to lead to a reduction in run rates of 5-10% this month on anticipated demand slowdown. Conventionally, demand slows down in Europe towards the end of the year, but it has firmed up, supported by a stronger Asian market which had allowed for some spot derivative exports, particularly of polyethylene. However, as demand has perked up, producers have had to increase/steady run rates and not reduce run rates further from October to November. Besides stronger demand for spot derivative exports from Asia, higher Asian derivative prices are beginning to draw away the threat of cheaper US volumes from Europe. Domestic European demand was stable because stock levels were being maintained at a low level throughout the chain and any seasonal decline could therefore be expected to be muted. Asian ethylene prices were being assessed at around US$1000/ton CFR Asia, by ICIS on high feedstock naphtha costs and limited spot availability. This compared to spot deep-sea prices last traded in Europe several weeks ago around US$900/ton CIF NWE, although trade sources suggested that given lacklustre buying interest and end-year timing, sellers would be hard-pressed to repeat such prices in Europe. Propylene in Europe, albeit not as tight as seen in the peak June-September period, was being described as snug as a couple of ongoing production issues were causing some short-term supply issues. Material was available, but sellers were said to be reluctant to let it go should cracker rates reduce further. Market participants are very cautious and that nobody wants to over-estimate supply and demand.
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