Olefins margins to remain weak in 2015: Eastman

OREANDA-NEWS. US ethylene and propylene prices will remain low, contributing to weak margins through the end of 2015, Eastman Chemical executives told analysts on the company's earnings call today.

"We are projecting lower propylene and ethylene prices for the remainder of the year as experienced in April and expect lower prices to continue for the rest of the year, negatively impacting olefin margins," said chief financial officer Curt Espeland.

Spot prices for refinery grade propylene hit six-year lows in mid-April, and polymer grade propylene fell to the lowest levels seen since June 2009, as downstream demand was weak.

"We saw a fairly large drop in propylene prices in April, and the more commoditized products that we have are going to follow that down," said Eastman chief executive Mark Costa. "Fortunately the commodities are a very small percentage of our total earnings portfolio, but it is the dynamic that is going on right now."

The company posted a profit of \$171mn in the first quarter of this year, down from a profit of \$233mn a year ago.

The results were partly impacted by Eastman's propane hedging strategy; the company disclosed earlier this year it hedged propane at just over 100?/USG through 2015.

"We have kind of hedged about two-thirds of our propane purchases in 2015 and just over 50pc in 2016," Espeland said.

Propane prices at Mont Belvieu, Texas during the first quarter were 59pc lower than prices during the same period in 2014.