Tight supply, strong demand continues to attract deep-sea C2, C3

Focus article by Nel Weddle

LONDON (ICIS)–Tight European ethylene and propylene supply on the back of a raft of planned and unplanned outages has led to a series of deepsea imports and buying interest is yet to wane, sources said on Tuesday.

Up to six ethylene cargoes and eight propylene cargoes from the US, Asia, Brazil and Mexico have so far been reported fixed for arrival in the May to late June period, totalling about 62,000 tonnes.

Around 13% of current ethylene nameplate capacity is offline, according to ICIS data.

Two planned maintenances – in Brindisi, Italy and Tisjavaros, Hungary are soon to be completed – hopefully without incident – but crackers in Gelsenkirchen and Wesseling, Germany, in Lavera, France, and Tarragona, Spain, are offline adding to the volumes already absent because of ongoing downtime at the Moerdijk cracker in the Netherlands. Propylene supply has also been constrained by refinery maintenances.

Competively-priced US propylene volume was the first to be booked into Europe. The first cargo on the Syn Antares loaded at the end of April – and the sixth on the vessel Stella Kosan which loads mid-June was booked last week.

One propylene cargo was reported fixed ex-Asia on the Norgas Orinda, loading late May, and a Brazilian cargo is also said to have been fixed for Europe. Delivered prices for these cargoes have been in the mid to high €1,000s/tonne CIF (cost, insurance and freight) NWE (northwest Europe).

On the ethylene side, two US cargoes have been fixed to Europe – earlier US availability headed to Asia as regional prices gave more attractive netbacks – the first on the Gaschem Caribic is due to load first half June, with the second, reportedly on the Gaschem Atlantic due to load around mid-June.

The first cargo was taken at $1,250/tonne CIF NWE, price details for the second have not been confirmed but is talked around $1,310/tonne CIF NWE.

A recent sales tender from Mexico was fixed at $1,400/tonne CIF Med (Mediterranean) and this cargo is due to load 12-18 June, on the JBU Schelde, according to sources. The buyer described this as a distressed purchase.

A Brazilian origin cargo was reported to be loading mid June on the Syn Antares and this is also expected to be moved into the Mediterranean.

The price in this case was in the low $1,300s/tonne CIF. Another Brazilian cargo is also heard fixed on the Norgas Napa vessel but details as to destination and price have so far remained elusive.

By comparison, a recent European origin CIF NWE deal for just 1,500 tonnes of ethylene was confirmed sold at €1,300/tonne – above $1,400/tonne in dollar terms.

The duration of the current outages and subsequent forces majeures is unclear but even if output is fully restored by the end of this month, many sources say derivative restocking will keep ethylene and propylene offtake robust and the markets will need the traditional derivative demand slow-down in the summer months to recover their balance.

Whether this keeps spot prices at current high levels remains to be seen.

Sources are mixed on this with some remarking that downstream buyers of polyolefins in particular are beginning to adopt a more cautious approach when it comes to prices, given the expected resumption of production, the imports and the perception that some European sellers are sitting on some volumes, unwilling to risk their own balances in case of further supply restrictions.

High polymer prices are leading to the expectation that Middle East and Asian volumes will soon be winging their way to Europe.

Others disagree and reckon that the peak of the market has not yet been seen.

“You can’t be cautious when you have zero stock, people are buying [derivatives] on a hand to mouth basis so have no chance yet to build up inventories,” a source said.

“If you would have asked me at EPCA last year, whether we would see this situation, I would have said no,” the source said, echoing the views of many.

The lack of visibility and predictability remains the hardest challenge for the market.

Propylene (€/tonne)

Ethylene (€/tonne)

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