Surging naphtha prices affect bottom line of ethylene makers

28-Nov-07

Surging naphtha prices have affected the bottom line of ethylene makers. Producer margins, that have entered negative territory, have affected cracking rates at plants across Asia. Very high prices of liquefied petroleum gas (LPG) - the alternative feedstock in ethylene cracking, have rendered substitution difficult. Asian producers are offering ethylene at approximately US$1250/MT FOB, but cannot find many buyers as traders demand is being met by an influx of ethylene cargoes on CFR basis from the Middle East. A wide gap of almost fifty dollars exists between buying intentions as US$1200/MT CFR Taiwan level and supplier offers. This has led to a suspension of ethylene sales in the spot market, as producers run their crackers at the minimum operating rates required to meet the demand from downstream players.