Updated to mid-August 2009
Asian market review by Peh Soo Hwee, ICIS pricing
Asian ethylene spot prices rose to 10-month highs during the quarter under review as delays in the delivery of exports from Iran, a key supplier to southeast Asia (SE Asia), encouraged short-covering by traders. Postponements in the start-up of new crackers in China and an ongoing scheduled debottlenecking at Shanghai Secco Petrochemical’s naphtha cracker during this period also boosted demand for ethylene.
By 10 July, ethylene was hovering at $1,000-1,060/tonne CFR (cost and freight) NE Asia (northeast Asia) and was traded at $990-1,070/tonne CFR SE Asia. Prices, however, started to taper off in August as buying momentum slowed noticeably in China following the restart of Secco’s newly expanded 1.2m tonne/year cracker around mid-July.
End-users said the producer was running the facility at close to full rates and they were amply covered by domestic and contractual cargoes. The absence of Asia’s largest consumer from the spot arena left the northeast market without direction and prices slumped to $950-980/tonne CFR NE Asia by mid-August.
In contrast, pricing in southeast Asia held up at $990-1,040/tonne CFR SE Asia, supported by firm buying interest for September, amid continual delays in the delivery of term cargoes from Iran.
European market review by Nel Weddle, ICIS pricing
European ethylene demand was better than expected in the mid-May to mid-August period. Cracker rates were ramped up 5-10% and some unplanned outages in July tightened the market considerably which offset any seasonal demand slow-down.
June contracts were agreed at €705/tonne FD (free delivered) NWE (northwest Europe), up €20/tonne from May. Spot levels still languished well below contract value. Import volume was pegged at around €590-600/tonne FD.
July contracts settled up €80/tonne at €785/tonne FD NWE largely because of a firmer upstream market and the need for cracker margins to improve. Spot prices picked up on the back of firmer naphtha to €600-650/tonne FD NWE.
The unplanned outages in July at a time when producers were preparing for the next raft of planned maintenance turnarounds in the September-October period turned the supply and demand balance to short and there was a flurry of spot activity at ever higher numbers as buyers, mainly producers, sought to cover their commitments.
Spot levels rose to the high €700s/tonne FD NWE. The firmer prices attracted cheap US volume and at the time of writing up to three US cargoes had been booked into Europe for August-September, in addition to the regular Mexican volume.
The August contract settled amid some delay at €795/tonne FD NWE, up €10/tonne. Sellers took their time to support the settlement; with naphtha reaching ten-month highs shortly after, they felt that their disappointment was justified.
US market review by William Lemos, ICIS pricing
US ethylene contracts for July were yet to be settled in early August, as buyers pushed for a decrease on the heels of ample supply and lower production costs.
US ethylene for June settled 3.00 cents/lb ($66/tonne) higher from May at 33.50 cents/lb.
Market participants predicted contracts in July would drop by 2-4 cents/lb, despite a producer nomination seeking an 8 cents/lb increase.
Lower ethylene spot prices in July were expected to weigh on contract negotiations. Spot ethylene in July average just over 21.50 cents/lb, down from 25.25 cents/lb in June.
Ethylene resumed an uptrend in early August, trading at around 24.00 cents/lb in the first week of the month.
Webinar - Understanding Ethylene margins
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Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyester, polyvinyl chloride (PVC) and polystyrene as well as fibres and other organic chemicals. These products are used in a wide variety of industrial and consumer markets such as the packaging, transportation and construction industries.
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