Eastman not seeking to sell Texas cracker

OREANDA-NEWS. February 02, 2016. Eastman Chemical wants to reduce its surplus ethylene and commodity intermediates in 2016 but does not intend to sell its cracker in Longview, Texas, chief executive Mark Costa said today.

"Our integrated Texas site produces advantaged ethylene and propylene, much of which we translate into our specialty derivatives, and as such will remain a critical integrated stream within our portfolio," Costa said on an earnings call today. "We've hired an investment bank to restart the process to monetize our excess ethylene position and the other commodity olefin related product lines that are not essential to our long-term strategy."

Eastman and Westlake have been engaged in a pipeline tariff dispute. Eastman relies on the pipeline to sell excess ethylene from its Longview cracker. In 2013, Westlake restricted movements of ethylene out of Longview and into Mont Belvieu, leaving its Longview facility as the only destination for ethylene shipped on the pipeline. Westlake raised the pipeline tariff from \\$1.90 to \\$3.50 per 100 lbs of ethylene.

Eastman expects ethylene prices to strengthen in the second quarter as several large US Gulf coast crackers are scheduled to undergo turnarounds.

"As this very large cracking maintenance schedule takes place this year, that should sort of move ethylene prices back up a bit," Costa said. "We're not expecting it to go back to last year but we certainly expect improvements versus right now."

Eastman's operating earnings were negatively affected by low oil prices and currency exchange rates.

"The significant decline in oil prices reduced the North America shale gas advantage. And as the market became long in ethylene and propylene, the drop in olefin prices outpaced the decline in oil, further impacting margins," chief financial officer Curt Espeland said.

Eastman's specialty fluids and intermediates profit declined by 4pc to \\$2.389bn, from \\$2.49bn a year earlier.