Petrochemicals, Strong olefins margins weak gasoline lead to overhang in Asia

1. © 2013 Platts, McGraw Hill Financial. All rights reserved.
Aromatics: Strong olefins margin, weak
gasoline lead to overhang in Asia
Singapore, April 04, 2014
Additional media contact: Elizabeth Catalano +44 207 176 6024.

2. First Quarter Olefin Margins

3. Olefins margins trigger an overhang
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• Attractive margins for olefins and a weak gasoline
market in Asia, triggered an overhang in the Asian
aromatics market in the first quarter of this year.
• "The bullish ethylene and propylene markets prompted
refiners to keep high operating rates at naphtha splitters
so as to produce more light naphtha for steam crackers
[for producing ethylene and propylene]," a trader said.
• Asian ethylene and propylene margins against naphtha
remained in positive territory through the first quarter,
data showed.

4. Access the Asian Petrochemical Data set
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5. Positive margins for Asian ethylene and
propylene
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• Asian ethylene and propylene margins against naphtha remained in
positive territory through the first quarter, data showed.
• The FOB Korea weekly ethylene margin hit an year-to-date high of
$185/mt on January 17, and FOB Korea propylene margin also
touched an year-to-date high of $263.63/mt on the same day,
Platts data showed.
• The FOB Korea weekly ethylene margin was assessed at $1,375/mt
March 28 and FOB Korea propylene margin was assessed at
$1,325/mt March 31.
• The Asian ethylene market found support in the first quarter from
lack of supply from the Middle East and massive turnarounds at
regional plants, according to market sources.

6. Aromatics languish on over supply
• The naphtha splitters refine full-range naphtha into light and
heavy naphtha in a 55:45 ratio.
• As splitter operating rates were increased to produce more
light naphtha, volume of heavy naphtha being produced also
increased.
• But, there was not enough consumption of heavy naphtha as
demand for most aromatics -- which are produced from
heavy naphtha -- remained lackluster in Asia in the first
quarter.
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7. Aromatics languish on over supply (…cont)
• "In an effort to consume the heavy naphtha stocks,
many refiners kept run rates at reformers at high levels
[producing more aromatics and] ... in turn, [putting]
pressure on aromatic prices," the trader said.
• Run rates at reformers were also kept high to produce
benzene, which found strong support during the first
quarter from strong demand from the US.
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8. Make sense of the issues and opportunities
created by shale gas in North America
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9. Isomer-MX prices down
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10. Asian Aromatics prices fall
• Asian isomer-grade mixed xylene, paraxylene and
toluene prices fell during the quarter.
• Isomer-MX prices were down 10.9% from $1,201/mt
FOB Korea on January 2 to $1,070.50/mt FOB Korea
March 31, while Asian PX and toluene prices were down
12.8% and 9.3% respectively.
• Benzene also fell, but relatively less -- down 6.6% over
the period.
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11. Benzene FOB Korea W2 : Jan 2 – Mar 31, 2014
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12. Weak gasoline demand pulls down Aromatics
• Another factor pulling down aromatics was weak gasoline
demand which meant reformate was being used to produce
aromatics instead of being blended with gasoline, according
to market sources.
• This further increased aromatics supply in Asia in the first
quarter. "A bearish gasoline market in Asia led refiners to
[produce] more reformate to [be used for producing
aromatics] rather than to blend gasoline," a trader said.
• Bearish gasoline demand had resulted in high reformate
inventory at refineries. But as refiners can still make a slight
profit by "producing aromatics" from the reformate instead
of gasoline, "they are still running aromatics plants at high
rates," a refinery source said.
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• Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or +44 207
176 6024.
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14. © 2014 Platts, McGraw Hill Financial. All rights reserved.
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