FocusAsia ethylene prices off 17-month highs, further slide feared

11 February 2010 06:36  [Source: ICIS news]

By Peh Soo Hwee

SINGAPORE (ICIS news)--Asian ethylene spot values are on their second week of decline, coming off a 17-month high of $1,400/tonne (€1,022/tonne) amid weak derivative demand, raising concerns of a sustained price downtrend, industry players said on Thursday.

Offers for spot ethylene for end-February or early March arrival were at $1,300-1,320/tonne CFR (cost and freight) Asia this week against transactions concluded at above $1,350/tonne CFR Asia in the week ending 5 February, market sources said.

Tight supply from the Middle East and Asia had helped push ethylene to a high of $1,400/tonne CFR (cost and freight) northeast (NE) Asia in late January.

But the unrelenting climb in monomer values had exerted a toll on key derivative sectors ranging from polyethylene (PE) to vinyls and monoethylene glycol (MEG), forcing production cuts at downstream plants, industry players said.

“Staying at $1,400/tonne was not possible because there is no support from PE due to negative margins,” said a Mid-east polyolefins maker.

Integrated high density PE margins fell $12/tonne week-on-week to $467/tonne last Friday but stand-alone margins have remained in negative territory since December 2009 and were at minus $173/tonne in the week ending 5 February, according to ICIS pricing margins data.

Ethylene cargoes coming from the Middle East may also ease the tight supply condition in Asia that was supporting spot prices, traders said.

A 4,000-5,000 tonne ethylene cargo from Abu Dhabi, United Arab Emirates for 10-15 March loading was offered early last week.

There were also market expectations that more cargoes would be available for sale from Rabigh, Saudi Arabia amid talk of production issues at a 600,000 tonne/year linear low density PE (LLDPE) plant in the country, sources said.

Traders had earlier estimated that more than 10,000 tonnes of ethylene could be exported from Rabigh this month, including the sale of a 5,500-tonne cargo last week at below $1,370/tonne CFR Indonesia for early March arrival.

A slackening in buying momentum from China – the region’s largest consumer of ethylene – ahead of the Lunar New Year holidays (14-19 February), also grounded ethylene’s price rally to a halt, industry sources said.

Sellers were banking on a heavy cracker turnaround schedule in 2010 (please see table below) to support ethylene prices but this could be offset by the emergence of new plants such as the start-up of Shell Chemicals’ 800,000 tonne/year naphtha cracker in Singapore within the first quarter.

The producer is expected to annually export around 150,000 tonnes of ethylene, with some portion already committed to term customers, traders said.

“[Ethylene] offers have come down and prices could continue to weaken due to new capacities coming on stream,” said an olefins trader in Mandarin.

In China, more than 2.5 m tonnes of new ethylene capacities are expected to come on stream this year and some traders said this could reduce import volumes below the 975,000 tonnes purchased by the country last year.

($1= €0.73)

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By: Peh Soo Hwee
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