08 March 2013 09:29 [Source: ICB]
The buy-sell divide in Asia's ethylene (C2) market is expected to deepen following recent record deals done into the southeastern part of the region at close to $1,550/tonne (€1,178/tonne), traders said.
"We will probably see rather strong resistance to ethylene at above $1,500/tonne from end-users and this could lead to them reducing derivative operating rates," said a regional olefins trader on 25 February.
Spot ethylene prices last hit the $1,500/tonne CFR (cost and freight) SE (southeast) Asia mark in the week ended 22 April 2011, according to ICIS data.
Ethylene spot prices were assessed at $1,430-1,470/tonne CFR SE Asia during the week ended 22 February, partly as the above deals could not be immediately confirmed.
March selling indications spiked on 25 February after two spot cargoes of 3,000-5,000 tonnes from northeast Asia for second-half March arrival were sold on 22 February to a producer in southeast Asia on a CFR Singapore basis. The same producer is seeking another March parcel.
One of the cargoes originated in Taiwan, and was purchased by a trader via a tender at $1,400-1,410/tonne on a free-on-board (FOB) basis, while the other cargo could be from Japan, sources said.
MORE IMPORTS NEEDED
"Supply is tight and we need one more cargo for March arrival," a source at the southeast Asian producer said, but the source declined to comment on the reasons for the purchases.
According to market sources, the producer was running its naphtha cracker at below full capacity but the reasons were unclear.
The unusual route of the record-high ethylene deals - from northeast Asia to the southeast part of the region - could explain their high prices. Freight from northeast to southeast Asia was estimated to be about $150/tonne - lower if the vessels are on time charter and depending on the position of the ships, market sources said.
MIDDLE EAST C2 TIGHT
Southeast Asia buyers typically secure some spot ethylene supplies from the Middle East, which is currently tight in supply of the material because of either planned cracker turnarounds or outages in January-February, sources said.
Most of the naphtha crackers in southeast Asia are running at around 90% capacity and the bulk of the ethylene produced is for captive or domestic demand, market sources said.
Regional traders acknowledged that it would be an uphill task negotiating higher prices with other ethylene buyers.
Buying ideas from end-users remained at below $1,450/tonne CFR SE Asia amid concerns that prices of key derivatives such as polyethylene (PE) were not keeping pace with the spike in feedstock ethylene costs.
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