Price and market trends: Asia olefins market at crossroads with price direction unclear

10 May 2013 09:45  [Source: ICB]

The Asia olefins market is currently at a crossroads, with industry players divided over the outlook for ethylene and propylene.

Industry sources said the slump in feedstock naphtha and crude prices earlier in April 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 cracker operator.

CRACKER RATES DOWN

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.

Taiwan's Formosa Petrochemical Corp said it plans to keep operating rates at its three naphtha crackers in Mailiao - combined ethylene nameplate capacity of 2.93m tonnes/year - unchanged at 90% of capacity in May.

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, industry sources said.

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

aSIA EHTYLENE

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 sold propylene instead of producing PP because of poor economics.

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

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.

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

KEP PROPYLENE PLANT

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 producer Nippon Shokubai's 460,000 tonne/year acrylic acid (AA) plant were among the facilities shut in Himeji following a September 2012 explosion at the site, and remains off line. Propylene market sources, however, expect the AA plant to resume operations in May.

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.


By: Peh Soo Hwee
+65 6780 4359



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