HOUSTON (ICIS news)--Conditions in the US olefins sector will change little in January, as the market will start 2008 with tight supplies and looming concerns over crude oil costs.
US consultant Robert Bauman of Nexant expects the nation's market will remain tight in 2008 amid continued strength in derivative demand, which remained firm in 2007 due to a boom in exports against the backdrop of a weak dollar.
"I am very bullish about US olefins through 2009," Bauman said during a recent industry event, adding that firm demand and lack of spare capacity meant that any disruption - planned or unplanned - could lead to tightness in the market.
A total of six US plants are due for planned maintenance in 2008, four in the first half of the year, according to an industry source. First in line is Chevron Phillips, with a 30-day turnaround scheduled for January at its 910,000 tonne/year Sweeny 33 unit in Texas.
Dow Chemical is expected to perform a 4-day turnaround at its 1m tonne/year Freeport 8 unit in the first quarter, and DuPont is scheduled to take its Orange cracker in Texas offline for 30 days in May.
In addition to the planned stoppages, the US will likely lose some 300m lb/year (136,000 tonnes/year) of its ethylene capacity in mid-2008, as one producer is scheduled to shut down a small unit in July.
While 300m lb/year may seem small for an industry with 63bn lb/year of capacity, the reduction does come to a market with no immediate expansion plans.
If the supply/demand picture seems to indicate US olefins are in for at least a stable 2008, the same cannot be said about feedstock costs, which squeezed producers' margins in 2007 and drove olefins prices to stratospheric levels.
Upstream pressure from crude oil and naphtha have pushed US olefins prices to record highs, with both the ethylene and propylene monthly contracts rising by almost 50% in the last 12 months.
US ethylene for December was partially settled at 61.50 cents/lb ($1,356/tonne), a 48% gain from 41.5 cents/lb in January, while the December refinery-grade propylene (RGP) contract, at about 55.75 cents/lb, was up 49% from 37.50 cents/lb in early 2007, according to global chemical market intelligence service ICIS pricing.
There were supply disruptions in 2007 - and olefins demand was strong - but most market sources said a 65% jump in crude oil prices influenced the increase in ethylene and propylene prices in the latter part of the year. And the US olefins market will continue to pay close attention to crude oil in 2008.
Demand could always tip the scale, but the key to US olefins prices in 2008 is mostly upstream, one US industry source added.
"Figure out what crude is going to do and that is your answer," the source said, referring to the price outlook for 2008.
US consultant Robert Bauman of Nexant expects the nation's market will remain tight in 2008 amid continued strength in derivative demand, which remained firm in 2007 due to a boom in exports against the backdrop of a weak dollar.
"I am very bullish about US olefins through 2009," Bauman said during a recent industry event, adding that firm demand and lack of spare capacity meant that any disruption - planned or unplanned - could lead to tightness in the market.
A total of six US plants are due for planned maintenance in 2008, four in the first half of the year, according to an industry source. First in line is Chevron Phillips, with a 30-day turnaround scheduled for January at its 910,000 tonne/year Sweeny 33 unit in Texas.
Dow Chemical is expected to perform a 4-day turnaround at its 1m tonne/year Freeport 8 unit in the first quarter, and DuPont is scheduled to take its Orange cracker in Texas offline for 30 days in May.
In addition to the planned stoppages, the US will likely lose some 300m lb/year (136,000 tonnes/year) of its ethylene capacity in mid-2008, as one producer is scheduled to shut down a small unit in July.
While 300m lb/year may seem small for an industry with 63bn lb/year of capacity, the reduction does come to a market with no immediate expansion plans.
If the supply/demand picture seems to indicate US olefins are in for at least a stable 2008, the same cannot be said about feedstock costs, which squeezed producers' margins in 2007 and drove olefins prices to stratospheric levels.
Upstream pressure from crude oil and naphtha have pushed US olefins prices to record highs, with both the ethylene and propylene monthly contracts rising by almost 50% in the last 12 months.
US ethylene for December was partially settled at 61.50 cents/lb ($1,356/tonne), a 48% gain from 41.5 cents/lb in January, while the December refinery-grade propylene (RGP) contract, at about 55.75 cents/lb, was up 49% from 37.50 cents/lb in early 2007, according to global chemical market intelligence service ICIS pricing.
There were supply disruptions in 2007 - and olefins demand was strong - but most market sources said a 65% jump in crude oil prices influenced the increase in ethylene and propylene prices in the latter part of the year. And the US olefins market will continue to pay close attention to crude oil in 2008.
Demand could always tip the scale, but the key to US olefins prices in 2008 is mostly upstream, one US industry source added.
"Figure out what crude is going to do and that is your answer," the source said, referring to the price outlook for 2008.
