Olefins producers in Asia are finding it increasingly difficult to compete with their counterparts in the Middle East. Ethane-based ethylene production costs in Saudi Arabia are around US$200/MT, US$250/MT in Qatar and US$615/MT in the US while naphtha-based ethylene production costs in Asia currently stand at US$1000/MT.
As per Platts, as ethylene margins over feedstock naphtha turned negative over the past few weeks, it has become extremely difficult for alkene's producers in Asia to compete with their Middle East counterparts, profits of ethylene producers who run gas-based crackers in Iran, Saudi Arabia and Qatar are estimated to exceed that of producers across Asia using naphtha as feedstock, by US$500-800/MT. Ethylene margins over feedstock naphtha was pegged at minus US$138.375/MT in Northeast Asia and at minus US$163.2/MT in Southeast Asia. While ethylene margins have remained stubbornly negative in the SEA markets since October 4, they went to sub-zero levels in Northeast Asia a fortnight ago.
Ethylene producers in Japan and South Korea have seen depleting margins in the past two weeks. Since their rates are not competitive enough for spot ethylene cargoes, they are directing all their ethylene to downstream plants. As Middle East producers balance domestic demand for natural gas with that in their steam crackers, the feedstock is becoming increasingly costlier for the ethylene producers. However, the feedstock prices still do not compare with those in Asia.
03-Nov-10 
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