FocusNE Asia ethylene heads southeast on weak China demand

26 August 2009 06:41  [Source: ICIS news]

By Peh Soo Hwee

SINGAPORE (ICIS news)--China’s weak demand for ethylene has paralysed trading activity in northeast (NE) Asia and cargoes have started heading towards the southeastern part of the region, where the material currently commands better prices, market sources said on Wednesday.

“The cargoes have all gone to southeast Asia,” said a Taiwanese buyer in Mandarin.

Talks with traders had lapsed due to a wide buy-sell gap, he added.

Selling ideas were pegged at up to $1,020-1,030/tonne (€714-721/tonne) CFR (cost and freight) NE Asia for cargoes arriving in September while buying ideas in the region hovered in the low to mid $900s/tonne CFR NE Asia, market sources said.

The lack of demand from ChinaAsia’s largest importer of ethylene – had left the northeast Asian market without direction over the past three weeks, they said.

End-users in the country were sufficiently covered as domestic crackers were running at high operating rates averaging 90-100%, industry sources said.

Shanghai Secco Petrochemical was running its newly expanded 1.2 m tonne/year cracker in Caojing at close to full rates, market sources said.

Impending cracker start-ups had also contributed to expectations of ample domestic supplies and Chinese buyers had no incentive to seek spot cargoes, they added.

Fujian Refining and Petrochemical Co (FREP) is expected to start up its new naphtha cracker – an 800,000 tonne/year facility in Quanzhou, southern China by the end of the month.

Spot ethylene prices slipped $10/tonne at the top-end of the range to $950-970/tonne CFR NE Asia last week due to limited buying interest, according to data from global chemical market intelligence service ICIS pricing.

Prices in southeast Asia, on the other hand, rose $20-40/tonne to $1,030-1,060/tonne CFR over the same period, based on the same data.

Demand was comparatively healthier in southeast Asia partly due to the continued delays in the delivery of term cargoes from Iran due to cracker shutdowns early this month.

Iran is the largest Middle-eastern supplier of ethylene to the region. It exported 680,000-700,000 tonnes of ethylene in 2008 but sales volumes are expected to fall to 450,000-500,000 tonnes this year due to planned and unplanned cracker outages.

Gas feedstock shortage at Assaluyeh in southern Iran had also capped plant operating rates at 50-60% for the most part of 2009, traders said.

During the week, a 3,500-tonne ethylene cargo was heard sold on formula to a buyer in Indonesia for loading in the first half of September from Japan or Korea.

Spot supply from Korea was limited with bulk of its ethylene output being fed into derivative polymer plants that were running hard on the back of healthy export demand but Japan has cargoes available due to turnarounds at downstream plants in September and October, market sources said.

Discussions between producers and traders were heard in the low $900s/tonne on FOB (free on board) basis although some market participants said there had been deals done below these levels.

“September is (the end of) the first half accounting period in Japan so inventories should be reduced,” said a domestic producer currently in talks to sell some spot ethylene cargoes.

($1 =€0.70)

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