Ethylene makers in Asia delay plant maintenance to benefit from near-record prices

14-Feb-07

Several Asian ethylene producers have postponed maintenance to benefit from near-record prices- In H1-2007, ethylene producers' profit is estimated to be double the ten-year average, and this high margin is a big disincentive for ethylene makers to carry out maintenance. Zinger forecasts ethylene margins will average US$600 a ton in the first six months of 2007, double the 10-year average of US$300 a ton. The margin, or price spread between ethylene and naphtha, surged to a near-record levels of about $800 a ton in December and January as crude oil lost 11%. Ethylene rose 12% in the year to Feb. 9, with prices closing at US$1,200 a ton last week, 16% lower than the record $1,430 reached in September. Naphtha prices added 10% in the year to Feb. 9. A large majority of the demand comes from China, that imported 8.8 million tons of chemicals made from ethylene and propylene in 2006, almost a third of Asian production. Margins are likely to fall as much as 33% to an average of US$400 a ton later this year, when Taiwan's Formosa Petrochemical starts a 1.2 million tpa factory, increasing the island's annual capacity by 42% to 4 million tons. Iran's Marun Petrochemical, a unit of National Petrochemical, will also start a 1.1 million tpa plant this year. Margins are likely to come under pressure in the second half - Chemical makers in Japan have decided to close half as much capacity this spring as in 2007. Honam Petrochemical, South Korea's fourth- biggest maker has also delayed work on its plant. Sanyo Petrochemical has also postponed its maintenance shutdown by a year to March 2008 because of higher ethylene prices and after government regulators waived an order for maintenance to be carried out annually. Honam Petrochemical said last week it had pushed back plans to shut its 720,000 tpa plant to October from May.