Spot ethylene and propylene markets are moving in opposite directions in Asia, with propylene prices being forced upwards due to players’ concerns about the possibility of a worsening supply drought while spot ethylene prices are sharply down from the levels seen just before the Chinese New Year holidays as fresh supplies from Japan and the Middle East have combined to ensure comfortable spot availability, as per Chemorbis.
In the ethylene market, spot prices CFR Northeast Asia lost US$40/ton this week while posting more significant declines of nearly US$140/ton when compared with the levels recorded at the beginning of February. Sellers in Japan and the Middle East have made a greater amount of ethylene available for export recently as some petrochemical plants in the Middle East have resumed production after shutdowns and production problems at downstream units led Japanese producers to seek alternative outlets for their ethylene production. Persistently high ethylene costs throughout the early part of February had left a large dent in the operating margins of derivative PE producers while suggesting healthy margins on ethylene production as ethylene spot prices were carrying a large premium over naphtha costs. Indeed, most ethylene producers say that they are maintaining high production rates as there is still a large cash spread of $510/ton separating spot ethylene prices from spot naphtha costs.
In the propylene market, supply is still said to be limited after the Chinese New Year holidays with most derivative producers continuing to run at full rates despite poor production economics out of fears that the existing supply drought will grow steadily worse over the next few months, with supply tightness for propylene projected to last throughout the spring and into the summer months. Producers in South Korea, Japan and Taiwan are scheduled to shut down thirteen plants with a combined propylene capacity of 365,000 tpa between now and June, while the market has also gained support from the fact that crude oil prices are once again hovering near US$80/barrel after slipping below the US$72/barrel threshold in early February.