Production margins for ethylene producers in North Asia turned positive on Monday at $9.25/mt, the first time since May 23 last year, amid falling naphtha and firmer ethylene spot prices.
On March 15, CFR Japan naphtha was assessed at a 10-month high of $1,088.13/mt, but the price has fallen to $1,043.75/mt on Monday, down 4.1%.
During the same period, CFR Northeast Asia ethylene prices have gone up $113/mt or 8.8% to $1,403/mt due to supply tightness amid extended shutdown of Showa Denko's Oita steam cracker.
Japan's Showa Denko did not restart its naphtha-fed steam cracker as scheduled on March 21 due to a technical problem with the cooling system at the complex.
The cracker, which has the capacity to produce 695,000 mt/year of ethylene and 425,000 mt/year of propylene, was shut March 10. It is now expected to restart only by the end of May.
Also, Taiwan's CPC had to shut its naphtha-fed steam cracker April 6 following a fire at a pipe connecting a butadiene unit to storage facilities at its Kaohsiung refinery and petrochemical complex. CPC, however, restarted early Monday the No. 5 steam cracker with a design capacity of 500,000 mt/year of ethylene and 250,000 mt/year of propylene.
WEAK DOWNSTREAM COULD PULL ETHYLENE MARGINS DOWN AGAIN
But how long margins will continue to remain positive depends on downstream demand, which is weak such as for polyethylene. "It is very hard [for PE makers] to survive due to high costs," a North Asian ethylene producer said.
Linear low density polyethylene was assessed at $1,375/mt CFR Far East Asia on Monday, $28/mt below feedstock ethylene.
This means 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.
For instance, propylene was $1,480/mt FOB Korea on Monday, while butadiene was assessed at $3,380/mt FOB Korea on Friday last week.
