Global ethylene prices post sharp increases

17-Jul-12
Spot ethylene prices posted sharp increases in major olefin markets including Europe, Asia and USA over the last week. Soaring ethylene values were triggered by increased buying interest, as per ChemOrbis. Apart from the steady gains in upstream markets, reduced supply was the main reason which attracted buyers to the market. The energy complex rose steadily nearly the whole past week. Nymex August delivery crude futures gained almost US$3/barrel while Brent crude oil prices surged by over US$4/barrel in the period. Tracking higher oil markets, spot naphtha offers moved up by US$15/ton on CFR Japan basis in Asia. Spot naphtha prices also increased by US$20/ton on CIF NWE basis in Europe. When compared to early July, those values represent larger increases of USS$65/ton and US$50/ton, respectively. In Europe, spot ethylene prices skyrocketed by €135/ton on FD NWE basis during last week. The recent values stood €185/ton above early July levels. Last week’s noteworthy increase in ethylene offers was attributed to strong buying interest for prompt cargoes from PVC makers in the region, some sources said. Rising spot values are expected to lift new ethylene contracts, which create bullish expectations for August in the market. Another driver behind the surge was restricted availability from regional crackers, as per ChemOrbis. Repsol’s cracker in Portugal has been offline since early May, while the company has yet to declare a certain restart date, according to market sources in Europe. The company had shut the 410,000 ttpa cracker in late May for maintenance and planned to restart it in early June before it delayed the date due to some technical issues. In addition, Dow Chemical has not restarted its 675,000 tpa cracker located in Tarragona, Spain. The cracker was taken down in end May for a scheduled maintenance, while the company is expected to restart it by around July 20. In Asia, robust buying interest from China pushed spot ethylene costs up by US$80/ton on CFR Northeast Asia basis week over week. Demand is foreseen to remain strong this week, market sources commented, due to upcoming cracker shutdowns. Chinese Sinopec Yangzi Petrochemical was to start a maintenance shutdown at its No.2 cracker in Jiangsu at the start of this week. The cracker which produces 350,000 tpa of ethylene under normal circumstances is expected to resume operations after 45 days. In the US, spot ethylene costs jumped at the end of last week supported by the news about lower operating rates at Ineos’ side. The company reportedly cut the rates at its Olefins 2 unit located at Chocolate Bayou as part of its plans for testing and upgrades. The unit can produce 875,000 tpa of olefins. Following this development, spot ethylene offers rose around 6.1 cents/lb (US$135/ton) on FD USG basis when compared to the previous week.
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