Olefin producers in NWE mull cracker run rate cuts on weak demand

09-Jun-11

Olefin producers in Northwest Europe may start scaling back cracker run rates to avert a heavy build up of supply if deterioration in demand continues, as per Platts. This will also help prevent a collapse in prices and provide some support on the market, particularly during the traditionally slow summer months. It is expected that producers would furnace maintenance or other activities which reduce production. The market is getting long, and June propylene offers are getting very little buying interest at the moment. European ethylene and propylene spot prices continued to slide last week as the subdued demand started to create some length in supply. At the end of last week, spot ethylene prices were down by €30/mt to €1050-1055/mt FD NWE - the year's low. On March 7, these prices had peaked to 2011 highs to €1195-1200/mt FD NWE. On the coast, prices were down US$25/mt to US$1450-1455/mt CIF MED and US$1500-1550/mt CIF NWE. Propylene spot prices for polymer grade have fallen steadily since April from €1235-1240/mt FD NWE and €1235-1240/mt CIF NWE to €1170-1175/mt FD NWE and €1150-1155/mt CIF NWE last week as naphtha prices fell and demand faltered. An integrated producer said its system was designed to be "structurally short" so it could quickly respond to sudden falls in demand without having to reduce cracker rates. Downstream, both polyethylene and polypropylene prices have come off from their historic highs as feedstock propylene and ethylene prices fell and orders slowed. Many PE and PP converters were seen buying hand-to-mouth, and were generally hesitant to restock in a falling market. Pressure in the PP market is expected to escalate further in the coming weeks with the approach of the seasonally slow summer period, compounded by the potential inflow of additional supply from the Middle East as the turnaround season in the region draws to a close.