21 January 2010 06:03 [Source: ICIS news]
By Peh Soo Hwee
Weekly ethylene margins in northeast ?xml:namespace>
“In the new year, business is good but the impact of new cracker capacities coming on stream will be felt from the second half of 2010 (see table below) and the price direction will be unclear then,” a Japanese cracker operator said.
The majority of naphtha crackers in Asia were running their facilities at full steam this month, powered by firm ethylene spot prices that were hovering at a 17-month high of $1,270-1,320/tonne (€902-937/tonne) CFR (cost and freight) northeast Asia in mid-January, according to data from ICIS pricing.
Although the benchmark naphtha crack spread had closed at a two-week low of $157.50/tonne versus Brent crude mid-week, robust downstream petrochemical margins helped maintain the naphtha inter-month spread between the first half and second half March contract at $8/tonne in backwardation, traders said.
Ethylene supply had tightened considerably due to a heavy cracker turnaround schedule this year and as a regional producer in the region had secured more than 50,000 tonnes of ethylene to build up stocks for its derivative units ahead of a planned cracker expansion in March, traders said.
In addition, limited exports from
Some market participants, however, were concerned that the unrelenting climb in ethylene prices would exert a toll on derivative demand. This was already being seen in the downstream high density polyethylene (HDPE) sector where some plants in southeast Asia were not running at full steam due to the high cost and lack of ethylene feed.
HDPE film grade spot prices were assessed at $1,270-1,360/tonne CFR China last week – almost on par with ethylene prices.
“There is strong resistance to buying ethylene in the high $1,300s/tonne CFR SE Asia,” said a Singapore-based olefins trader. “It doesn’t make sense for any product.”
The outlook for the second half of the year, however, seems less bullish as new cracker capacities and the gradual withdrawal of the government stimulus packages are expected to hit petrochemical prices.
($1 = €0.71)
Additional reporting by Felicia Loo
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