Shell's ethylene demand will sustain strong feedstock markets through Q1-10

At a time when Asian petrochemical makers rush to replenish naphtha inventories, Royal Dutch Shell's ethylene demand will sustain the strong feedstock naphtha and ethylene market through January-March, and will continue until its cracking facility comes online. The additional supplies will feed Royal Dutch Shell's new 750,000 tpa mono-ethylene glycol (MEG) plant on Jurong Island. The MEG facility has been onstream since second week December, while its 800,000 tpa cracker that will feed this plant is not expected to start till February or March. Even though the MEG plant is believed to be running below 50% capacity, it still requires the basic feedstock ethylene. The MEG plant is being run under these conditions to benefit from China's strong demand for polymers. Though the rough estimates of Shells’ requirements of 10,000-20,000 tons per month are diminutive when compared with Japan's annual capacity of over 7.5 mln tpa of ethylene, Shell's purchases come at a time of extremely short supply, as most of the ethylene have been taken up to make polyethylene in South Korea, Japan and Taiwan. When its cracker comes onstream, Shell is expected to use the cheaper hydrowax as its main feedstock amid high naphtha prices and use less than 60% of the ethylene produced at the new cracker. This has led to concerns of an ethylene supply glut in the market, which in turn will lead to reduced imports of naphtha feedstock by major buyers South Korea, Japan and Taiwan.
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