NE Asia ethylene gains on Chinese buying, limited offers

Focus article by Yeow Pei Lin

SINGAPORE (ICIS)–Prices for spot ethylene cargoes into northeast Asia extended their gains due to restocking activity in China amid limited offers. A resurgence of Iranian supply has not dampened the sentiment of Asian players so far.

Some Chinese buyers raised their bids and buying ideas for May-delivery cargoes this week up to $1,200/tonne CFR (cost and freight) NE (northeast) Asia, higher than the assessed range of $1,150-1,180/tonne CFR NE Asia in the previous week ended 7 April.

These discussions did not progress as sellers held back on their offers in anticipation of higher prices in the weeks ahead. They targeted prices at $1,250/tonne CFR NE Asia.

“We have been seeking offers since last week. Some sellers are not even willing to give specific price indications,” a buyer said.

Buying enquiries in China were partly driven by an ongoing shutdown at a domestic methanol-to-olefin (MTO) plant.

A Chinese end-user would have to increase its imports to compensate for a disruption in the supply from Fund Energy Changzhou that took its plant down on 31 March. The company has not set a restart date and there was talk that its unit, which has an ethylene nameplate capacity of 165,000 tonnes/year could be down for several months.

News of production woes in Singapore reinforced expectations that the strong March and April exports from southeast Asia to mainly China would likely see a reduction next month. The plentiful supply in southeast Asia was one of the key factors that drove spot ethylene prices in northeast Asia down in March.

Petrochemical Corporation of Singapore (PCS) is shutting its 450,000 tonne/year No 1 cracker for around two weeks from 17 April to undergo repairs. This could further tighten the supply in Singapore, where a long turnaround at ExxonMobil’s 1m tonne/year cracker is ongoing. Shipments from the island state would likely be hit by the lower output although there has yet to be any import enquiries.

Separately, Malaysia-based Lotte Titan Chemical took its two crackers with a combined ethylene capacity of 720,000 tonnes/year down on 11 April for several days, due to inadequate water supply.

The impact of the short outage on the broader market is expected to be minimal. Its downstream plants at the same complex were shut as well, while its polyethylene (PE) plants in Indonesia have sufficient ethylene stock.

Production in the broader Asia market would be impacted by a series of cracker turnarounds in Thailand, Japan and South Korea during the second quarter.

Spot supply from Iran totaling 15,000-19,000 tonnes for April loading has no immediate impact on prices in Asia. A number of buyers are unable to purchase cargoes of that origin due to payment issues.

Some end-users in China said prices could soon reach a point where downstream production cuts become prevalent.

With ethylene prices at $1,200/tonne CFR NE Asia, downstream margins are negative except for styrene monomer, according to buyers.