Westlake Weighs Ethylene Expansion Amid Cost Pressures in Polymer Market - ICIS

Key Highlights: 

1. Price Trends: PVC K67 at ₹68,000/MT (Mundra), LDPE at ₹1,16,000/MT (Delhi), and PET at ₹89,500/MT (Ahmedabad).
2. Supply Challenges: Ethylene market faces expansion delays due to high inflation in labor and materials.
3. VCM Price Movements: CFR Far East Asia up by $5 to $530/MT; South East Asia up by $5 to $555/MT.
4. Industry News: Westlake considers a 40% capacity expansion for its ethylene cracker but remains cautious.
5. Market Expectation: Ethylene supply remains tight as investment hesitancy persists amid rising costs.

Polymer Price Update: Latest Rates Across Major Hubs

• In Mundra, DAGU PVC K57 (DG700) is available at ₹72,700 per metric ton, while XINFA PVC K67 (SG5) is priced at ₹68,000 per metric ton. 
• In Delhi, HDPE HM FILMS (PRIME) is listed at ₹92,900 per metric ton, whereas LDPE 2 MFI NON SLIP (PRIME) is priced at ₹1,16,000 per metric ton. 
• NATURAL TAITA ABS (5000W) is being offered in Delhi at ₹1,47,000 per metric ton, while HALDIA PPCP RANDOM (M312 - PRIME) is available at ₹1,02,000 per metric ton.
• In Rajkot, MRPL PPHP LAMINATION (HY035R) is priced at ₹1,01,000 per metric ton, and LLDPE 1 MFI SLIP (PRIME) is available at ₹94,440 per metric ton. 
• Meanwhile, Wankai PET (WK-801) is listed in Ahmedabad at ₹89,500 per metric ton, and HMEL MDPE BM (B0148D) is priced at ₹95,560 per metric ton. 
• Additionally, Sun Eight CPVC K67 (XSJ700) is available in Mundra at ₹1,23,000 per metric ton.

Demand and Supply: Ethylene Expansion Faces Inflationary Pressures

• As per the ICIS report, the ethylene market continues to face a delicate balance between supply and demand as producers navigate inflationary pressures.
• Westlake’s potential expansion of its joint-venture cracker in Louisiana aligns with the company’s need for additional ethylene to support its growing vinyl chloride monomer (VCM) capacity in Geismar. 
• However, the company remains cautious, citing high labor and material costs as significant factors in determining the feasibility of expanding production. Westlake currently relies on merchant ethylene markets to meet its needs, and expanding its own ethylene capacity could mitigate exposure to volatile market pricing.
• Should the proposed expansion proceed, the joint-venture cracker could increase capacity by 40%, with Westlake receiving half of the output. 
• Given ongoing market uncertainties, producers are weighing cost-effective ways to address supply-side constraints while maintaining profitability in an environment of rising project costs and inflation-driven constraints.

Industry News: Westlake’s Expansion Plans & Market Impact

• Westlake’s Chief Financial Officer, Steven Bender, highlighted that before any ethylene expansion at its joint-venture cracker, a thorough cost analysis must be conducted. 
• Inflation in labor and material costs remains a key concern, leading to uncertainties regarding capital expenditures. 
• The company has not provided a timeline for its Geismar VCM expansion, which is expected to rely on additional ethylene supplies from either the merchant market or internal capacity expansions. 
• Other industry players, including Alpek, Indorama, and Phillips 66, have experienced significant cost escalations, leading to project delays or cancellations. 
• These challenges emphasize broader industry trends where capital-intensive investments are under increasing scrutiny due to inflationary pressures.
• VCM prices saw an upward movement, with CFR Far East Asia (FEA) rising by $5 to $530 per metric ton, while CFR South East Asia (SEA) increased by $5 to $555 per metric ton.

Market Expectation: Ethylene Capacity Constraints & Future Expectations

• The ethylene market is expected to remain under pressure as producers assess cost-effective expansion strategies. Rising inflation and capital expenditure constraints could limit new production capacity in the short term. I
• f Westlake proceeds with its expansion, it could strengthen its market position, reducing reliance on external ethylene sources. However, given the broader inflationary trends, cautious investment approaches are likely to persist across the sector.