Unplanned outages cause price hikes
By Staff -- Purchasing, 6/3/1999
A trio of recent unplanned outages along the U.S. Gulf Coast have drastically reduced ethylene production there, causing producers to once again call for price hikes on ethylene and its derivatives. The general consensus of analysts and buyers is that this time, the price hikes are certain to take hold.For contract ethylene volumes, U.S. producers already have implemented three consecutive 0.5¢/lb increases for January, February, and March. In April, producers saw a 1¢/lb increase go through--the first price hike to stick after several months of proposals. Now producers are calling for price hikes of 2¢/lb, effective in May.
Before the production outages, prices were low due to oversupply of product, but according to analysts at The pace Consultants, Inc., a petrochemical market analysis firm based in Houston, Texas, ethylene is now scarce throughout the Gulf states.
Currently, ethylene contracts average about 20.2¢/lb and spot tags are about 22¢/lb. Look for prices to increase due to rising demand by about 2¢/lb in the next couple of months. Then, barring further unplanned outages, prices should remain flat through the first few months of 2000, when a number of capacity expansions are rumored to take place.
pace analyst Tom Wizner says, "Ethylene producers have some strength behind their latest proposed price hikes because supplies are woefully low." pace says the current demand for ethylene product is about seven days, which is lower than it was at the beginning of the year.
Ethylene spot tags and derivative supplies are tightening particularly due to news of the prolonged outage at Equistar's OP-1 unit at Channelview, Texas. The unit was damaged by a small fire in April, causing the company to declare force majeure on its ethylene deliveries.
Also, Union Carbide shut down its No. 1 line at its Taft, La., facility because of a fouling problem in its purging enquenchant system. While the line is down, Union Carbide has pushed up maintenance turnaround originally scheduled for July to be handled while the enquenchant problem is being addressed.
Union Carbide also had an unplanned outage at its Texas City, Texas, facility. The 1.5 billion lb/yr unit had a pipe burst.
Market analysts indicate that ethylene supplies will likely remain tight until basf Corp., Fina Oil, and Formosa Plastics Corp., USA complete expansion projects. The three producers have plans to build new crackers, which should improve capacity by early 2001.
There are an estimated 24 domestic producers of ethylene, accounting for approximately 57 billion lb/yr of nameplate capacity.
Major markets for ethylene are ethylene oxide, ethylene glycol, polyethylenes, styrene, vinyl chloride monomer, and polyvinyl chloride production.
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