Latin America-Asia olefins arbitrage window opens

12 February 2008 09:10  [Source: ICIS news]

SINGAPORE (ICIS news)--The trans-Pacific arbitrage window to Asia for light olefins opened briefly before the Lunar New Year holidays, with a westbound ship loaded with ethylene and propylene from Venezuela set to arrive into South Korea by mid-March, traders in Asia said on Tuesday.

 

The open arbitrage is seen to be a temporary phenomenon, reportedly due to excess supply from Venezuelan producer Pequiven.

 

Two lots ranging between 3-5,000 tonnes propylene and ethylene were shipped on the Clipper Helen, markets sources said, sold to a Korean olefins trader.

 

The ethylene portion of the cargo was said to be under negotiation, offered at around $1,400/tonne CFR.  

 

The estimated shipping time between Venezuela and South Korea is four-five weeks and the freight was assessed at a whopping $400/tonne, almost 28% of the ethylene price.

 

Hence, the estimated FOB Venezuela price was $1,000/tonne and below, market sources added.

 

In comparison, US spot ethylene prices were now around 46 cents/lb, the equivalent of $1,013/tonne.

 

With talk of sliding prices in Asia, it remains to be seen if the arbitrage will remain open. Asian buyers are now revising their bids to $1,350/tonne CFR NE Asia, while offers hold steady around $1,400/tonne CFR NE Asia, according to global chemical intelligence service ICIS pricing.

 

The second export cargo from Venezuela after the Asian-bound cargo was said to have been shipped to Europe.

State-run Pequiven operates two crackers in El Tablazo with a combined capacity of around 600,000 tonnes/year ethylene.


By: Steve Tan
+65 6780 4359



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