Asian naphtha cracker operators are considering a reduction in plant operating rates in H2-10, as per ICIS. Propped by robust variable margins of over US$400/ton helped by a strong performance in the olefins markets, Asian operators were running their naphtha crackers at 90-100% for first few months of the year. However, earnings are being eroded by a sharp ethylene price slump since H2-May. Ethylene margins slumped by around 38% (US$134-212/ton) in northeast Asia last week. Ethylene prices have collapsed to seven-month lows of US$930-1000/ton CFR northeast Asia last week, dragged down by ample supply from the Middle East and limited tank space, as per ICIS pricing. Deal conclusion is proving unsuccessful as naphtha is over US$650/ton and ethylene lingers around US$900/ton. Sellers would ideally like to target a price range of US$950-1,000/ton FOB China, at these naphtha levels.
Currently, eight crackers in Japan are undergoing maintenance, scheduled for completion by the end of August, keeping ethylene balance tight. On completion of the turnaround season, production rates could be reduced. Outlook for markets does not seem very optimistic as more depressing data emerged from Europe and Hungary. This month, US jobs data added fewer jobs than expected, a sizeable portion of those hired were temporary for the US Census, and comments suggest Hungary could be heading for a Greece-style debt crisis. With this, worries linger about the European fiscal problems and measures by the Chinese government to tighten credit lending will hurt consumer demand, impacting the petrochemical industry.
Derivative markets such as styrene monomer (SM) and polyethylene (PE) that had taken the strain of mounting ethylene values earlier in the year, are getting some respite from the sharp correction. Standalone high density PE margins in northeast Asia jumped 40% to US$110/ton last week.
08-Jun-10 
{{comment.DateTimeStampDisplay}}
{{comment.Comments}}