13 June 2008 04:44 [Source: ICIS news]
SINGAPORE (ICIS news)--The trans-Pacific arbitrage window from Asia to Latin America for ethylene has opened with a westbound ship loaded with ethylene (C2) from South Korea heading to Venezuela, a South Korean trader confirmed on Friday.
"Samsung Total and Lotte Daesan have come up with 4,500 tonnes of ethylene to be shipped to Venezuela," a source from Samsung Total said in Korean.
Lotte Daesan forked out 2,500 tonnes of C2 for the deal and the remaining 2,000 tonnes belonged to Samsung Total, the source added.
The open arbitrage was seen to be a temporary phenomenon, as Venezuelan petrochemical company Pequiven was looking to buy C2 cargoes due to problems at its crackers, another South Korean producer who was familiar with the deal commented.
Freight cost for the cargo, which was sold at $1,550/tonne FOB (free on board) Korea, was heard to be below market price as it was a backhaul cargo for the vessel, Hera.
It takes about four-five weeks to ship cargo to Venezuela from South Korea and the freight cost in the market was assessed in a range of $340-400/tonne, more than 22% of the C2 price.
Hence, the estimated price Pequiven paid for the delivered cargo was about $1,800/tonne, market sources added.
C2 prices in Asia have been climbing for the past few weeks, with prices assessed at $1,530-1,580/tonne FOB Korea and $1,600/tonne CFR (cost and freight) China according to global chemical intelligence service ICIS pricing.
In comparison, US spot C2 prices were now around 62.25-62.75cents/lb, the equivalent of $1,372-1,382/tonne.
Despite the lower prices in the US, Pequiven could not purchase cargoes from the US due to government restrictions.
In February this year, the arbitrage window from Latin America to Asia opened when two cargoes ranging from 3,000-5,000 tonnes were shipped on the vessel Clipper Helen from Venezuela to a South Korean olefins trader.
The estimated price of C2 in Venezuela at the time of the deal was $1,000/tonne FOB and below, with the deals done at around $1,400/tonne CFR northeast (NE) Asia.
State-run Pequiven operates two crackers in El Tablazo with a combined capacity of around 600,000 tonnes/year.
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