Seoul February 15 2022: South Korea’s Yeochun Naphtha Cracking Center said in a letter to its customers dated Feb. 14 that it has declared force majeure on its No. 3 naphtha-fed steam cracker in Yeosu following an explosion on Feb 11.
A company source with direct knowledge of the matter told S&P Global Platts Feb. 14 that the No. 3 cracker will likely shut down sometime this week, but was unable to say how long the cracker would remain shut.
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In the letter, YNCC said that Korea’s Ministry of Manpower ordered it to halt plant operations as of Feb. 11 and the company has temporarily stopped operations at the No. 3 cracker.
“It might take a while for us to restart due to maintenance and investigations by the regulatory body, as a result, we declared force majeure,” the letter showed.
The explosion at the No. 3 cracker, which is able to produce 470,000 mt/year of ethylene and 270,000 mt/year of propylene, occurred at 9:26 am (1226 am GMT) on Feb. 11.
On Feb. 14, FOB Korea ethylene offers were heard at $1,250/mt as some market sources cited support from supply constraints and feedstock volatility. In the domestic Chinese markets, ethylene offers were raised by Yuan 400/mt to Yuan 8,600/mt ex-tank as demand for local product grew.
Impact on Asian propylene
This declaration of force majeure is likely to lend further support to the Asian propylene market as prices are already on an uptrend following the decision by Northeast Asia’s steam crackers to reduce run rates amid weak ethylene margins.
“Many traders and Korean customers are looking for propylene spot cargo,” a propylene producer in Korea, who heard that the shutdown might last for one month, said. “Chinese traders also immediately contacted me saying that they want to buy propylene.”
“[But] so many propylene vessels are empty as the the supply of propylene from Korea decreased,” the trader added.
A YNCC term customer in Yeosu said: “We have to look for some spot [propylene] cargoes.”
The already tight ethylene supply in Asia is also expected to get even tighter, several market sources said.
“We have received several bids since last Friday [Feb. 11], but as we had already cut our operating rates, we need to consider carefully our production margins and consumption needs before we make an official offer,” a producer based in South Korea said.
On Feb. 14, FOB Korea ethylene offers were heard at $1,250/mt as some market sources cited support from supply constraints and feedstock volatility. In the domestic Chinese markets, ethylene offers were raised by Yuan 400/mt to Yuan 8,600/mt ex-tank as demand for local product grew.
With ethylene supply woes expected to persist in the near term, offers are likely to remain limited, while demand robust.
“It has been quite difficult trying to secure cargoes last week as there were few offers and after the announcement of YNCC’s force majeure, I suppose it will be even harder,” another buyer said.
