FocusAsia ethylene prices to ebb on dwindling Chinese imports

15 December 2010 05:42  [Source: ICIS news]

By Felicia Loo and Heng Hui

SINGAPORE (ICIS)--Asian ethylene prices are likely to ebb for January-delivered cargoes, as the robust Chinese import demand is seen fizzling out on a weakening downstream domestic market, traders said on Wednesday.

For January, top energy user China is expected to reduce spot ethylene imports to possibly 4,000-5,000 tonnes, following a hefty purchase of 10,000 tonnes or more for December delivery to plug a domestic shortfall, they added.

“Ethylene demand is down [in China]. Buyers have already wrapped up purchases for December and they haven’t started negotiations for January,” said one trader.

Prices of ethylene - the basic petrochemical building block - were assessed at  $1,150-1,170/tonne (€863-878/tonne) CFR (cost and freight) Northeast (NE) Asia on Wednesday, down $20-30/tonne from levels earlier in the week, ICIS data showed.

Reflecting a weakening market, Asian polyvinyl chloride (PVC) prices were expected to drift lower due to the softening domestic prices in China, traders said.

Plus, with the upcoming long Chinese Lunar New Year holidays in early February, buyers could defer their purchases until after the holiday. As a result, demand for January PVC cargoes were expected to be weak, they said.

Furthermore, news that China had met its energy saving and emissions reduction targets, led to market players’ beliefs that the power rationing policy would be relaxed or even stopped by the end of the year.

This would lead to increased chlor-alkali operating rates, which would result in an excess supply of PVC from China, further exerting downward pressure on PVC prices, traders said.

In the mid term, Chinese demand for ethylene might also be dampened by trial methanol-to-olefins (MTO) plants in China such as Shenhua Baotou , traders said.

There are more projects in the pipeline over the next few years, including Total Petrochemical’s MTO project and Yulin Energy and Chemical’s MTO plan.

Asian methanol prices eased to $370-400/tonne CFR NE and southeast (SE) Asia amid bearish sentiment, following declines in the key China market, they said.

Chinese methanol prices had fallen from a high of around $415/tonne CFR China in mid November to around the $370/tonne CFR China levels last week on weak demand, particularly in the dimethyl ether sector, traders said.

Moreover, the bearish mood in the Asian ethylene market was being compounded by expectations of additional supply coming from Iran. Some 5,000 tonnes of Iranian ethylene was expected to land in northeast Asia next month, they said.

However, the market could seek solace from a recent cracker outage at a Japanese ethylene producer that might put a lid to price loss, traders said.

Japan’s Keiyo Ethylene shut its 740,000 tonne/year naphtha cracker in Ichihara, Chiba prefecture, on Monday due to an outage. Traders said the cracker was likely to remain shut for a week.

“The shutdown may have a peripheral impact,” said a trader. “Market players are uncertain about ethylene so they are likely to buy on a floating basis for next month.”

Additional reporting by Aaron Cheong

($1 = €0.75)

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By: Felicia Loo

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