Crude drop slows chemical sales: Celanese

OREANDA-NEWS. Petrochemical sales so far this quarter are weak as the rapid decline in global crude prices caused customers to destock inventories rather than purchase materials as they await the bottom, Celanese chief executive Mark Rohr told analysts in the company's fourth quarter earnings call today.

"I think until we get a sense of where the floor is, and where prices are moving, a lot of folks, if they can delay purchases, they will do it," Rohr said, adding that all petrochemical companies may have "a little bit of a slow start" to the new year.

The 50pc drop in crude prices "had far-reaching effects, pressuring global GDP growth as well as the pricing of raw materials like methanol and ethylene," the Dallas-based manufacturer said.

Celanese is a major producer of vinyl acetate monomer, which is an ethylene-derived component in coatings and adhesives.

Rohr estimated the company could see as much as a \$300mn drop in raw material costs, including ethylene, due to the decline in energy prices. However, as much of the company's ethylene costs are passed on to customers through formula-based contracts, Celanese will not be able to gain any margin, he added.

Excluding the cost of ethylene, the decline in Celanese's raw materials costs is around \$100mn, Rohr said. Celanese will seek to boost margins by not fully passing along the cost decreases to customers.

"What we will attempt to do is keep it all, but what I would say is the odds of us doing that are very, very low," he said.

While first quarter sales are expected to be slow as buyers seek better prices, the lunar new year, which falls in late February, is also expected to contribute to weaker demand from Asia, he said.

Celanese's new 1.3mn t/yr methanol facility at its Clear Lake, Texas acetyl complex, is 60pc complete, Rohr said. The project remains on track for startup by 1 October.