Axiall unwilling to abandon US cracker project

OREANDA-NEWS. Axiall continues to pursue its proposed 1mn t/yr ethane cracker in Louisiana, even as capital costs rise and ethylene margins weaken, as the company needs cheap ethylene to remain competitive in the chlorovinyls business, Axiall chief executive Paul Carrico told investors on the company's earnings call today.

"Our challenge is still not having cost-based ethylene to where all of our competitors will have that before it is all said and done," Carrico said. "That is a very significant portion of the vinyl chain at this point in terms of margin, so we have to deal with that in some fashion too."

Axiall's proposed cracker project, a 50:50 joint venture with South Korea's Lotte Chemical, would provide feedstock ethylene for Axiall's chlorovinyls segment.

Axiall's project comes amid a flurry of new ethylene capacity slated to come online in the Gulf coast region in the next several years that is driving up the cost of both building materials and labor. The Atlanta-based petrochemical producer has postponed a final investment decision on the cracker pending further cost analysis, but Carrico said it is important to leave the option on the table.

"Going forward, it continues to be important to us to get an optimum position in cost-based ethylene in some fashion," he said. "We continue to study what we have on the table as well as continue to look for opportunities that might be there as some of this ethylene volume builds."

Axiall reported a net loss of \$10.6mn for the first quarter, compared with a net loss of \$11.6mn for the first quarter of 2014, as lower caustic soda and vinyl prices offset higher operating rates and lower feedstock and energy costs.

The company is currently seeking price increases for chlorine, caustic soda and polyvinyl chloride, which would improve margins. However, Carrico admitted that successful implementation of those price increases will depend on improving demand in both the domestic and export markets in the second quarter.