Production margins for ethylene producers in North Asia turned positive on Monday at US$9.25/mt, the first time since May 23 2011, amid falling naphtha and firmer ethylene spot prices, as per Platts. On March 15, CFR Japan naphtha was assessed at a 10-month high of US$1,088.1/mt, and fell by over 4% to US$1043.75/mt on Monday. In the same period, CFR Northeast Asia ethylene prices have gone up US$113/mt or 8.8% to US$1403/mt due to supply tightness amid extended shutdown of Showa Denko's Oita steam cracker. Japan's Showa Denko delayed restart its naphtha-fed steam cracker as scheduled on March 21 due to a technical problem with the cooling system at the complex to end of May. The cracker, which has the capacity to produce 695,000 tpa of ethylene and 425,000 tpa of propylene, was shut March 10. Taiwan's CPC had to shut its naphtha-fed steam cracker on April 6 following a fire at a pipe connecting a butadiene unit to storage facilities at its Kaohsiung refinery and petrochemical complex. CPC also restarted the No. 5 steam cracker with a design capacity of 500,000 tpa of ethylene and 250,000 tpa of propylene.
Player doubt how long the margins will continue to remain positive depends on downstream demand, which is weak for polyethylene. PE makers are finding it hard to survive due to high costs. LLPDE was assessed at US$1375/mt CFR Far East Asia on Monday, US$28/mt below feedstock ethylene, indicating that for integrated producers, it would make better economic sense to cut operations at their LLDPE plants and sell ethylene in the spot market. Operators would continue to run naphtha-fed steam crackers at high rates even if ethylene margins are poor to take advantage of propylene and butadiene prices, which are often higher. Propylene was US$1480/mt FOB Korea on Monday, while butadiene was assessed at US$3380/mt FOB Korea on Friday last week.
18-Apr-12 
