Shutdown after fire at Maoming 1 mln tpa cracker raise supply concerns

05-Jun-08

Supplies are expected to tighten as a result of a fire and subsequent shutdown of Maoming Petrochemical's 1mln tpa cracker and its derivative units. Sellers offers for June are sporadic in anticipation of a price hike. Sinopec will also reduce ethylene production by 65,000 tons this month to be substituted by an increase in oil supplies of almost 200,000 tons towards earthquake relief and reconstruction efforts, the summer grain harvest and the forthcoming Olympics. Asian polyolefins producers and traders have withdrawn their offers to China in anticipation of higher prices. However, as Maoming uses the olefins for captive consumption by downstream polyolefin plants, ethylene (C2) and propylene (C3) prices are not expected to be directly impacted. Maoming has shut down its 370,000 tpa LDPE unit, 200,000 tpa LLDPE/HDPE swing plant, and 350,000 tpa HDPE unit. This could cause Polyethylene (PE) prices to rise. Prices could be driven up in the polypropylene (PP) market, which might in turn drive up feedstock C3 prices. The fire, expected to affect feedstock ethylene prices, will in turn trigger a hike in monoethylene glycol (MEG) prices.