Asia-Pacific naphtha crackers to cut operating rates

Several naphtha-based crackers throughout Asia-Pacific are considering cutting their operating rates as margin losses deepen.

Prices of naphtha have been rising from below $500/t cfr Japan in early October to more than $570/t cfr Japan this week. Prices of ethylene fell from $800/t cfr northeast Asia to $700/t cfr over the same period. Propylene prices also fell from $990/t cfr northeast Asia at the end of October to $700/t cfr this week.

Rising feedstock costs while olefins prices fall have resulted in cracker operators experiencing mounting margins pressure. Naphtha crackers margins were almost $280/t in early October but are now at almost -$140/t this week, according to Argus' calculations.

South Korea's SKGC in October had already dropped the operating rate at its smaller 160,000 t/yr cracker to 80pc. The producer will now be cutting rates at its larger 670,000 t/yr cracker as well, although details are not immediately available. Market participants forecast SKGC will reduce run rates at the larger cracker by 10-20pc.

Other naphtha cracker operators in October also adjusted operating rates marginally lower to ease inventory pressure after operating rates at derivative polyethylene units were reduced. But these units are now operating normally. Chinese crackers are currently maintaining their operating rates and have no intention to cut output for now.

More South Korean naphtha crackers are now seriously considering rate cuts. LG Chemicals expects to soon make a decision soon about cutting operations by 10-15pc at its larger Daesan-based cracker with a capacity of 1.27mn t/yr. Lotte Chemical and YNCC are also considering adjusting production lower at their cracker and related derivative units.

A southeast Asian producer has possibly loaded down its cracker operations since October, although details are not immediately available. Crackers owned by Siam Cement and Dow Chemicals in Thailand will also rationalize operations. Map Ta Phut Olefins' 900,000 t/yr cracker and the Rayong Olefins' 800,000 t/yr cracker will both cut run rates by 10pc in January.

By Kate Lee

source: Argus Media