FocusAsia olefins at crossroads, market divided over outlook

29 April 2013 07:43  [Source: ICIS news]

By Peh Soo Hwee

Asia olefins market divided over outlookSINGAPORE (ICIS)--The Asia olefins market is currently at a crossroad, with industry players divided over the outlook  for ethylene and propylene.

Industry sources said the slump in feedstock naphtha and crude prices earlier this month had triggered price adjustments down the petrochemical chain.

The correction in monomer prices was also exacerbated by weak derivative demand notably from the leading China market.

Asia ethylene spot prices fell to an eight-month low of $1,170-1,200/tonne (€901-924/tonne) CFR (cost and freight) northeast (NE) during the week ended 26 April while propylene recovered slightly from a four-month low to settle at $1,270-1,310/tonne CFR NE Asia during the same period.

“If naphtha does not decline further, there should be some support for the ethylene and propylene markets,” said a regional cracker operator.

The olefins price decline had prompted most producers in the region to lower their cracker operating rates to 80-95% in April from up to full rates in March because of poor margins.

Ethylene margins based on naphtha feedstock in northeast Asia plunged by $99/tonne to $113/tonne during the week ended 26 April on the back of an uptick in raw material costs and a decline in ethylene prices, according to data from ICIS.

Taiwan’s Formosa Petrochemical Corp said that it planned to keep the operating rates at its three naphtha crackers in Mailiao – with a combined ethylene nameplate capacity of 2.93m tonnes/year – at 90% of capacity in May, unchanged from April.

The cracker rate cuts in Asia, however, failed to stem the price decline in the olefins markets, mainly due to weaker-than-expected demand from China, which is both a key consumer and producer of petrochemicals, industry  sources said.

“We see supply rather than demand,” said an olefins trader. “Ethylene supply is there from Japan and South Korea.”

As for propylene, buyers in China and Taiwan are holding back on buying imported material due to ample availability of competitively-priced domestic cargoes.

Domestic prices in Shandong were last assessed at yuan (CNY) 9,500-9,700/tonne ($1,542-1,575/tonne) ex-tank during the week ended 26 April.

The local market had come under pressure as some producers were selling propylene instead of producing PP due to poor economics.

Daqing Petrochemical has been selling propylene in the market since the restart of its 600,000 tonne/year naphtha cracker at Daqing in Heilongjiang province on 18 April as its derivative 300,000 tonne/year PP unit remains off line, market sources said.

In addition, Jilin Petrochemical was also heard selling propylene from its 850,000 tonne/year naphtha cracker because of an ongoing turnaround at its acrylonitrile (ACN) units.

However, some propylene producers remain optimistic that spot prices may rebound amid reduced operating rates at a key facility in the region, and as a key derivative acrylic acid plant (AA) in Japan is widely expected to resume operations in May, which would cap propylene exports from Korea and Japan.

South Korea’s GS Caltex is still running  its vacuum gas oil (VGO) fluid catalytic cracking (FCC) unit in Yeosu, which can produce around 250,000 tonnes/year of propylene, at 60% capacity after restarting the unit as planned on 14 April.

Market participants are closely watching the status of this plant as the bulk of the propylene produced is exported on a term or spot basis.

Japanese chemical producer Nippon Shokubai’s 460,000 tonne/year AA plant were among the facilities that were shut in Himeji following an explosion at the site in September 2012 and remains off line pending government approval to restart the unit.

Propylene market sources, however, expect the AA plant to resume operations in May although this could not be immediately confirmed.

Selling indications for June loading  propylene cargoes were heard at above $1,250/tonne FOB (free-on-board) Korea, higher than deals for May  shipments that were mostly concluded at $1,220-1,230/tonne FOB Korea.

($1 = €0.77 / $1 = CNY6.16)

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

By: Peh Soo Hwee
+65 6780 4359

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