Price and market trends: NE Asia ethylene hits three-month low, no bottom in sight

22 March 2013 09:17  [Source: ICB]

Northeast Asian ethylene spot prices have fallen to a three-month low and could head further south because of weak derivative demand, market sources said on 15 March.

Ethylene daily spot prices were assessed at $1,250-1,270/tonne (€962.50-977.90) CFR (cost and freight) northeast (NE) Asia on 14 March - the lowest since 7 December 2012, and off a record four-and-a-half-year high of $1,400-1,430/tonne CFR NE Asia that was achieved in late February this year, according to ICIS data.

Asia ethylene

Ethylene spot prices had kicked off 2013 on a strong note, mainly driven by supply fundamentals.

Producers in South Korea had limited spot availability because of improved domestic demand on the back of a pick-up in polymer production in the months of January-February.

EXPORTS TO US, EUROPE

Higher ethylene prices in Europe and the US partly due to both planned and unplanned cracker shutdowns had also lured product out of Asia, keeping supply in the region snug, sources said.

The market rally in northeast Asia started to lose steam by the end of February as spot prices of key derivatives ranging from polyethylene (PE) to monoethylene glycol (MEG) could not keep pace with the hike in ethylene feedstock values.

As such, buying interest dwindled from the leading China market after the Lunar New Year holidays particularly as derivative demand did not take off as strongly as expected.

"Before the Lunar New Year holidays, ethylene buyers in China had bought a lot of cargoes but downstream demand did not improve after the New Year and stocks became too high," said a Taiwan-based olefins trader, speaking in Mandarin.

Derivative PE and MEG spot prices also weakened in recent weeks partly in line with falls in upstream naphtha and crude futures and amid macro-economic concerns from the European debt crisis to recent cooling measures on the property market in China.

The ethylene market plunge had caught some market players by surprise as they had expected the uptrend to last longer partly because of limited spot supply from the region and the Middle East.

Both planned and unplanned cracker turnarounds in Abu Dhabi and Saudi Arabia in January-February had capped a lid on exports from these two countries, which led to a firmer market in southeast Asia compared with the northeast as the former traditionally receives ethylene from the Middle East.

Ethylene spot prices in southeast Asia were assessed at $1,370-1,410/tonne CFR SE Asia on 14 March.

EARLY PEAK

"We had expected an extremely good first half and the market to peak around mid-May but the market has now peaked earlier than expected," said a Japanese olefins trader.

The sharp pace of the decline has also raised concerns among ethylene buyers, most of whom retreated to the sidelines by the end of the week.

"The market is very unstable and we do not want to take risks," said a vinyls producer based in South Korea.


By: Peh Soo Hwee
+65 6780 4359



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