Lower ethane gas and low oil prices make Iran PE more cost competitive vs Saudi Arabian material

24-May-16

Lower ethane gas prices in Iran and low oil prices have caused Iranian polyethylene and naphtha-based PE to be more cost competitive against Saudi Arabian material, typically known as the region with the lowest PE production costs, as per sources in APIC 2016, as per Platts. Northeast and Southeast Asian naphtha-based PE production has dropped by some 60% since crude oil was around US$115/barrel in June 2014, to US$641-675/mt, according to Platts Petrochemical Analytics. However, despite Saudi raw material ethane gas price increases to US$1.75mm/BTU earlier this year, the nation remains the lowest cost producer at around US$322/mt. Iranian ethane gas has dropped from US$240/mt to US$150/mt so far this year, according to Iranian sources, reducing PE production costs by about 22% to around US$500/mt. Meanwhile, coal-based PE is starting to lose its huge production cost competitiveness against cheap oil and gas, as it remains largely unchanged at around US$710/mt, according to Platts Petrochemical Analytics. "[Coal-based PE] was attractive before in a high price oil environment, but now naphtha is more attractive," a producer said. A number of sources surveyed said this would lead to new coal-based PE plants being delayed due to the lack of competitiveness.