Major naphtha crackers in Asia running at full capacity

16-Jul-15

Major naphtha crackers in Asia are running at full capacity as these petrochemical makers earn near record margins. Margins for turning naphtha into ethylene are almost at all time highs as low oil prices cut feedstock costs amid delayed or cancelled projects that have kept the market undersupplied, as per Reuters. Asian naphtha crackers - once considered uncompetitive against U.S. and Middle East rivals using natural gas - have seen their profits rise because of cheap oil and many are running their plants at full capacity to make ethylene. Some U.S. ethylene projects have been cancelled or delayed as the 50% drop in oil prices over the past year has made shale gas less attractive as a feedstock. The delays should keep ethylene tight and Asian petrochemical margins strong for the next several years, said analysts. Processors in China and the Middle East are making similar decisions to delay coal-to-olefin units and their own natural gas crackers, cutting further into the mid- to long-term supply outlook for ethylene. The naphtha crackers could enjoy the current boom through the end of 2017. Petrochemical makers are expected to maintain earning momentums thanks to a limited capacity addition until the full scale start up of North American ethane crackers in 2018. Heavy maintenance schedule in H1-2015 for naphtha units in Asia helped to sustain cracking margins. South Korea, Asia's top ethylene exporter to China, will shut four crackers with a total of nearly 3.8 mln tpa of ethylene capacity for maintenance this year, more than twice as much as it shut last year. The maintenance was mostly carried out in the first-half of 2015. Taiwan's Formosa Petrochemical Corp also shut its 700,000 tpa Mailiao unit in June for maintenance. In Japan, Sumitomo Chemical Corp and Mitsubishi Chemical each shut one of their crackers for good within the last year or so, and Asahi Kasei Corp will scrap its cracker next February. Despite the recently improved margins for naphtha crackers, many in the sector still plan to switch to natural gas as abundant global supplies mean a cheap price outlook. LG Chem will complete its joint venture to make 840,000 tpa of ethylene from ethane in Kazakhstan in 2019.