OREANDA-NEWS. August 18, 2015.  The average price of Brent crude oil during the second quarter 2015 was approximately \\$61.86/bbl, 15% higher than the average price of crude during the previous quarter, but a 44% drop over the year. And because crude and naphtha are highly correlated, global naphtha prices have also dropped by similar amounts on a percentage basis. For instance, USGC Naphtha prices during the second quarter averaged \\$487/mt, 14% higher than the previous quarter, but 43% lower over the year. Lower naphtha prices have benefited ethylene producers using naphtha.

The other side of the equation, so to speak, also affected the bottom line for ethylene producers in Europe and Asia. The price of ethylene in NW Europe and NE Asia increased 46% and 37%, respectively over the previous quarter. With lower global naphtha prices, the predominant feedstock for steam cracking in Europe and Asia, coupled with higher ethylene prices as a result of supply disruptions in both regions, producers in Europe and Asia experienced higher production margins. Production margins for NW Europe and NE Asia were the highest during June of this year according to Platts Analytics. Unfortunately for the US, production margins dropped significantly due to the low price of USGC ethylene.

Platts Analytics reviewed quarterly earnings reports for several companies with steam cracker operations including chemical companies LyondellBasell, Dow, and Westlake Chemical, and integrated oil and gas giants BP, ExxonMobil, and Total. Summaries of the results of the second quarter earnings reports with a focus on steam cracking are as follows.

United States

Margins for LyondellBasell's US Olefins segment were lower than the previous quarter due to the lower co-product prices and the higher cost of liquid feedstock, according the company's second quarter 2015 earnings report. Operating rates for its steam crackers averaged 95% during the second quarter. Operating rates in Europe averaged 97%, and higher profits in the region were able to offset the rising price of ethylene during the quarter. Overall operating rates for LyondellBasell's ethylene units were higher than the industry average. During the second quarter EBITDA as reported was \\$2.2 billion, 12% higher than the previous quarter, and 12.6% higher than the second quarter in 2014.

LyondellBasell currently has a total ethylene production capacity of approximately 4.8 million mt/yr in the US, with operations in Channelview, Texas, Corpus Christi, Texas, La Porte, Texas, Clinton, Iowa, and Morris, Illinois. The company also has a total ethylene production capacity of 1.9 million mt in Europe including facilities in Berre, France, Munchsmunster, Germany, and Wesseling, Germany. Plans for new ethylene supply include the Corpus Christi plant expansion with expected startup in 2016. Below is a table of current ethylene capacity for LyondellBasell.

Dow reported an EBITDA increase of \\$210 million over the year to \\$2.4 billion during the second quarter. While the company did not directly comment on its US olefin business, statuses of Western Europe and Asia business activity in steam cracking were mentioned during the Q&A session of the earnings call. Operating rates in Asia and Europe were higher due to the unplanned outages of older facilities, averaging in the high 80s and low 90s. The naphtha price slippage in Asia, as a result of the lower oil prices, positively impacted naphtha based margins. In Western Europe, the company continues to invest in increasing its flexibility to crack propane and butane, mainly propane due to the bearish NGL market outlook.

Dow currently has a total ethylene production capacity of approximately 5.2 million mt/yr in the US and Canada, with operations in Fort Saskatchwan, Alberta, Freeport, Texas, Taft, Texas, and Plaquemine, Louisiana. The company also has one steam cracker with two units with a capacity of roughly 760,000 mt/yr at its Bahia Blanca complex in Argentina. European facilities, with a combined capacity of 2.94 million mt/yr, include its Bohlen, Germany, Terneuzen, Netherlands, and Tarragona, Spain units. Total global ethylene capacity for Dow is approximately 8.9 million mt/yr. Plans for new ethylene capacity include a 1.5 million mt/yr steam cracker located in Freeport, Texas with expected startup in 2017. Below is a table of current ethylene capacity for Dow.

Westlake Chemical reported a record second quarter earnings, according to the company's latest quarterly earnings report. The company reported an EBITDA of \\$377.8 million, an increase of \\$57.9 over the second quarter in 2014. Compared to the previous quarter, EBITDA during the second quarter was \\$80.8 million higher. The olefins segment however reported an income from operations of \\$220.9 million, a decrease of \\$117.8 million over the second quarter in 2014, due to lower olefin margins as a result of lower prices.

Westlake currently has a total ethylene production capacity of approximately 2.9 million mt/yr in the US with locations in Calvert City, Kentucky and Lake Charles, Louisiana. There are currently no announced plans for expansions or new facilities. Below is a table of current ethylene capacity for Westlake.