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Asia naphtha crackers run high on firm PE margin

November 10/2010

(ICIS) -- Most naphtha crackers in Asia, with downstream derivatives, continue to operate at near full capacity or higher, thanks to a firm integrated margin, but sentiment may turn bearish in the face of an ethylene price slump, traders said on Tuesday.

The integrated polyethylene (PE) margin held firm at $235/tonne (?169/tonne) in the week ended 5 November, ICIS data showed.

On the other hand, the ethylene or steam cracker margin plummeted to $34/tonne NE (northeast) Asia in the same period, versus $72/tonne the previous week and $252/tonne in September, the data showed.

As a rule of thumb, cracking operators may enjoy full cost recovery if the spread between naphtha and ethylene hovers at a minimum of $250/tonne, traders said.

Ethylene prices fell to $980-1,000/tonne CFR (cost & freight) NE Asia last week, against month-ago levels of $1,110-1,150/tonne due to an armada of supply from the Middle East, ICIS data showed.

Regional integrated naphtha crackers are running at high rates because of a healthy polymers market, adding to the flood of ethylene supply.


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