Cuts in operating rates at Asian crackers to support the region’s ethylene market

Speculation on the direction of Asia’s spot ethylene market is dominated by the possibility of cuts in operating rate by cracker operators in the region, as per Chemorbis. Though some sellers anticipate the market to find support from lower operating rates, another school of thought predicts a further downtrend as new capacities start up. Spot ethylene prices in both Northeast Asia and Southeast Asia were largely unchanged over the past week after posting declines of US$350-370/ton in May. As players in China and Taiwan are away due to public holidays, trading activities are expected to remain lackluster through the first half of this week, as players in other countries closely watch cracker operating rates in Asia and the Middle East for clues on the likely direction of the market in the coming weeks. Some hopes were ignited with last week’s news of delay of the new Borogue 2 cracker with an ethylene capacity of 1.4 mln tpa from mid-June to late-June, leaving the company with no ethylene availability for the month of June. Indonesia’s Chandra Asri has reduced operating rates at their 600,000 tpa cracker in Indonesia to 80-90% of capacity for an indeterminate period of time owing to negative operating margins. Mitsui Chemicals is planning to shut 450,000-500,000 tpa of ethylene capacity from June 21 to July 26 for maintenance. Others could also follow suit in a bid to cope with the weakening market outlook. New capacities that have come onstream in Asia and the Middle East have led some players to predict sufficient supply in the coming month. In China, Sinopec Zhenhai has reportedly achieved on-spec production at its new 1 mln tpa cracker, while South Korea’s YNCC is planning to bring its 465,000 tpa No. 3 cracker back on-line later this week following some maintenance and capacity expansion work.
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