Eastman Chemical is seeing some “pockets of destocking” in the market, but no evidence of a broader slowdown – with the exception of automotive in China, Mark Costa, the CEO of the US-based producer, said in an update on Friday.
Destocking was occurring in areas such as coatings and tyres, the CEO told analysts during Eastman’s Q3 earnings call.
Eastman expects potential destocking could be driven by trade concerns in China.
The US-China trade dispute may affect Eastman customers’ ability to export back into the US, in areas such as specialty plastics or consumer durable goods, he said.
“I think it’s really important we don’t overreact to what’s going on in the fourth quarter right now,” Costa added.
It was hard have insight into primary demand, especially in Q4 when there is normal destocking anyway, he said.
“We are not in a position where we say we see a primary demand problem out there in the market place” apart from auto issues in China, he said.
And even in auto, much of Eastman’s supply in China goes to the luxury market which still sees growth, he said.
Overall, orders were holding up relatively well in October across Eastman’s specialties business, the CEO added.
Looking at 2019, Eastman assumes raw and energy material prices fairly stable, as well as similar economic growth as in 2018, he said.
Lowering ethylene exposure
Costa also updated on Eastman’s progress on work to minimise ethylene production at its Longview, Texas site, thus mitigating exposure to the ethylene market.
For a $20m investment Eastman is improving cracker flexibility to include refinery-grade propylene (RGP) in the feedstock slate, enabling it to ramp up polymer-grade propylene (PGP) production,
As a result, Eastman will be able to reduce ethylene production in 2019 by about 80%, “relatively to normal”, while producing more propylene, Costa said.
Eastman’s propane purchases will drop by half, ethane purchases will be about 20% less, while the company will be buying about 150,000 tonnes of RGP, he said.
“This is a $20m investment, with a payback of less than a year, just a great investment opportunity for us,” the CEO said.
By Stefan Baumgarten
Source: ICIS News
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