Northeast Asia ethylene prices rebound post-China holiday

13 October 2016 10:25 Source:ICIS News

Port of Qingdao 13 October 2016

(recasts paragraph 8 for clarity)

SINGAPORE (ICIS)--Ethylene prices in northeast Asia increased for the first time in six weeks, with the recovery driven by restocking activity in China, higher Chinese domestic polyethylene (PE) prices and an outage at Shell’s cracker in Singapore, market sources said on Thursday.

The price rebound is, however, capped by the weakening styrene monomer (SM) sector.

Two spot ethylene cargoes of at least 3,000-3,500 tonnes each were sold into China this week at $1,050-1,075/tonne CFR (cost and freight) NE (northeast) Asia for November delivery. The transacted prices are higher compared to the assessment at $1,020-1,050/tonne CFR NE Asia for the week ended 7 October, according to ICIS data.

End-users in China are replenishing their stock after the Golden Week holiday ended on 7 October, amid expectations that prices are likely have bottomed out.

A strong post-holiday rebound in the Chinese domestic PE prices should help ethylene prices to recover, according to sources in China.

On 12 October, low density PE (LDPE) prices in east China rose to yuan (CNY) 11,300-11,500/tonne EXWH (ex-warehouse) from 10,650-10,900/tonne EXWH on 30 September, driven by limited supply and strong gains on crude futures.

The more buoyant market has prompted integrated PE producers in China to increase their production, which is likely to reduce the supply of spot ethylene shipments in November. Shanghai Petrochemical has restarted its two PE plants with a combined capacity of 440,000 tonnes/year on Thursday. The plants were shut on 30 September due to weak margins. Such production reductions had earlier resulted in more October ethylene shipments available for merchant sale.

The outage at Shell’s Singapore cracker, which has a 960,000 tonne/year ethylene capacity, on 27 September is impacting the flow of cargoes from southeast Asia, the Middle East and Europe to northeast Asia, according to market sources.  

The economics for traders to move cargoes of these origins to markets such as China and Taiwan have become unfavourable after prices in southeast Asia firmed on news of the cracker outage, while prices in northeast Asia fell during end-September to early October.

“Buyers in China would need to increase their bids in order to compete with southeast Asian buyers, which enjoy a freight advantage,” a trader said.

Exports from Singapore have also slowed down following Shell’s cracker shutdown. A producer was heard to have put its shipment plans on hold.

But the gains in ethylene spot prices are capped by the weakening conditions in China’s SM market, buyers said.

“SM domestic prices fell this week. The sales for November are not looking good,’’ a SM maker said.

Focus article by Yeow Pei Lin

Northeast Asia ethylene prices rebound post-China holiday

($1 = CNY6.72)

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Picture: Qingdao port in China's Shandong province (Source: Imaginechina/REX/Shutterstock)

By Yeow Pei Lin