03 January 2006 03:57 [Source: ICIS news]
By Steve Tan
SINGAPORE (ICIS news)--Asian demand for ethylene and propylene is expected to remain bullish in 2006, with prices for the olefins forecast to be around the four-figure territory on the back of tight regional supply, according to traders and sellers.
The signs were evident towards the tail end of 2005 - olefins traders and producers faced an uphill task in keeping buyers satisfied for 2006 as tight vessel space, a heavy upcoming shutdown schedule and increased buying appetite left many buyers scouring for cargoes.
Nineteen naphtha crackers are to be brought offline from March-October during the traditional turnaround season, compared with 16 scheduled shutdowns in 2005. In ?xml:namespace>
Any unexpected cracker outage would be sharply felt throughout the region due to the snug balance, added the sources.
“It’s definitely going to be tight, with over 1m tonne of ethylene demand expected to come into the market,” said Yuha Kodaira, a senior official with Japanese trading house Marubeni Corp, citing new downstream capacities coming on stream in China, Japan and Taiwan.
“The key derivatives affecting the demand would be the polyethylene (PE) and VCM,” said another Tokyo-based olefins trader. Ethylene prices could cross the $1,100/tonne high that they reached in 2005 if the derivatives sectors are healthy, he added.
There was, however, a caveat. Surging prices would be capped by increased price competition downstream, especially in the VCM sector. Approximately 80% of Chinese ethylene spot demand will be from VCM producers, who are struggling to make ends meet in the face of competition from lower-cost acetylene-based PVC makers.
There are also new ethylene capacities coming on stream in 2006. The start-up of CNOOC & Shell Petrochemical Co's (CSPC) new 800,000 tonne/year cracker at
Other cracker expansions are mostly in
In Southeast Asia, Titan Chemicals in
As a co-product of naphtha cracking, propylene supplies are also expected to remain tight due to the numerous cracker shutdowns. In addition, at least two propane dehydrogenation units, one in
“Fundamentally ethylene and propylene is going to be tight, but propylene supply will improve towards the second half of the year as new capacities come on stream,” said a Singapore-based olefins trader.
An additional 17-18 Liquefied Petroleum Gas (LPG) vessels, as well as on-purpose propylene production such as metathesis plants, and deep catalytic crackers, will bring much-needed propylene supplies into the spot markets, he added.
A large amount of that will go to
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