FocusAsia olefins market may see price recovery on tight supply

06 July 2011 03:54  [Source: ICIS news]

Mailiao petrochemical complex. FormosaBy Peh Soo Hwee

SINGAPORE (ICIS)--Asia’s ethylene and propylene prices may recover from current lows on tightening supply, with a slew of turnarounds at regional crackers kicking in next month, industry sources said on Wednesday.

The region’s olefins markets have been at a contango since late June, with deals for August-arrival cargoes concluded at higher prices than for July trades, they said.

Ethylene was hovering at a seven-month low of $1,100-1,130/tonne (€759-780/tonne) CFR (cost and freight) northeast (NE) Asia last week, while propylene prices were assessed at $1,400-1,420/tonne CFR NE (northeast) Asia – a level not seen in five months – over the same period, according to ICIS data.

“There are a lot of cracker shutdowns in August (please see table below), so we think that demand will be higher next month,” said a Japanese olefins trader.

Petrochemical giant Shell is expected to shut its 800,000 tonne/year mixed-feed cracker in Bukom, Singapore, next month. The plant will likely be taken off line around 11 August for more than 30 days, partly for some equipment change, said market sources.

The company has declined to comment on its maintenance schedule.

“We are expecting Shell to purchase some propylene next month but firm discussions have yet to start,” said another Japanese olefins trader.

Meanwhile, Shell has already bought spot ethylene parcels as it plans to keep a derivative 750,000 tonne/year monoethylene glycol (MEG) plant at the same site running during the cracker shutdown, market sources said.

“The producer is likely to be in a buying mode from July to September for ethylene,” said an industry source.

Estimates from market sources place Shell’s monthly ethylene requirements at around 40,000 tonnes in the third quarter.

Consequently, ethylene deals into southeast Asia for first-half August arrival hit a high of $1,200/tonne CFR SE (southeast) Asia last week, compared with fixtures for July arrival that were heard at lower prices - under $1,150/tonne CFR SE Asia.

For propylene, some traders said they were aiming for higher price targets for August-arrival cargoes compared with July deals that were mainly done in the low-$1,400/tonne CFR NE Asia levels. Firm offers are only expected to emerge later this week.

Limited tank space in the key markets of China, Taiwan, and southeast Asia in July because of ongoing derivative plant shutdowns and weak downstream polymer demand has capped spot demand, and has been exerting pressure on ethylene and propylene prices.

Meanwhile, some potential olefins buyers doubt that prices will strengthen soon, saying they would need to see stronger signs of a pick-up in polymer demand that will support higher olefins prices.

Polyethylene (PE) and polypropylene production usually peaks in the third quarter to meet Christmas orders for finished goods. But there is concern that business will be slower this year given continued weakness in the major exports markets of Europe and the US.

“We need to see a pick-up in derivative demand before we can start buying propylene at higher prices,” said a buyer in southeast Asia.

Asia cracker turnarounds in August

Company

Location

Capacity (t)

Turnaround dates

Shell Chemicals

Bukom, Singapore

800,000

11 Aug for more than 30 days

CPC

Kaohsiung, Taiwan

500,000

mid-Aug for 40-45 days

Formosa

Mailiao, Taiwan

1,200,000

mid-Aug for 40-45 days

Shanghai Secco

Shanghai, China

1,200,000

H1 Aug for 20 days

Yanshan Petrochemical

Yanshan, China

760,000

end-Aug for around 1 mth (TBC)

($1 = €0.69)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: Peh Soo Hwee
+65 6780 4359



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