Ethylene Prices Keep Falling
South Korean petrochemical companies, including LG Chem and Lotte Chemical, are reducing the production of ethylene and synthetic fibers with economic and exchange rate conditions increasingly affecting their profitability.
As of Sept. 5, the per-ton prices of ethylene and naphtha were US$950 and US$670, respectively. The ethylene spread, that is, the difference between the two was US$280 per ton and the BEP of the spread is US$300. In other words, more ethylene production currently means more loss. The spread was US$414 in April but dropped to US$262 in May, US$169 in June and US$115 in July before a slight rise to US$151 in August.
Under the circumstances, South Korean petrochemical companies are lowering their capacity utilization from over 90 percent. LG Chem’s naphtha cracking center capacity utilization has been 80 percent since the second quarter and Lotte Chemical is also approaching 80 percent or so.
The prices of synthetic fibers such as polyethylene are falling at the same time to add to their profitability burden. The average synthetic fiber price per ton dropped from US$1,398 to US$1,049 from September last year to September this year.
The price of high-density polyethylene, which accounts for the biggest portion, fell 13.8 percent to US$909 in that period. Those of low-density polyethylene and polypropylene fell 23.7 percent and 18.5 percent to US$1,069 and US$919, respectively. Those of PVC and ABS dropped 35.6 percent and 38 percent, respectively.
The capacity utilization adjustment is already leading to a decline in exports. Last month, exports from the petrochemical sector were US$4.4 billion, down 11.7 percent from a year ago.