Spot ethylene prices nose-dive across the globe

23-May-12
Spot ethylene prices have been under dual pressure in major markets since the beginning of May, as per ChemOrbis. Falling crude oil and naphtha prices have pulled spot ethylene prices considerably down on the one side while persistently weak demand from downstream markets has contributed to the weekly losses on the other side. In Asia, spot ethylene values have lost US$45/ton on CFR Northeast Asia basis only in the first two trading days of this week while the size of the decrease is larger at US$100/ton when compared to early last week. When going back to the beginning of the month, a noteworthy decrease of US$255/ton is seen in the spot ethylene market. Several cracker operators in Asia have seriously started considering run cuts in order to bring a halt to the freefall in ethylene prices. Their squeezed margins are also adding to their desire to reduce their operating rates, said sources in the region. Spot ethylene prices have been dipping in Europe as well since the early days of May. The market has registered a decline of €40/ton only in the first trading day of the week. In comparison to early last week, spot prices indicate a €70/ton decrease while the total decrease seen from early May levels is €160/ton. Overall ethylene supply is reportedly accumulating on the producers’ side as there is almost no buying interest from the downstream derivatives market. The grim economic outlook in Europe is mainly blamed for the absence of demand, comment players. On top of the already rising stocks in the region, Middle Eastern cargoes are said to be offered at competitive prices while Mexican cargoes are also on the way to Europe. In accordance with these developments in the spot ethylene market, more players are now speculating about a large decrease for June in the contract market. The heftiest decline when compared to the beginning of the month is seen in the US market with spot ethylene prices losing US$276/ton (12.5 cents/lb)while the market has posted a weekly decrease of US$74/ton (2 cents/lb). Concerns about improving supply have come to the fore as several major crackers returned from maintenance in the first half of May, as per ChemOrbis. Sluggish demand from the downstream PE market has exacerbated the bearish sentiment and paved the way for sizeable decreases in the ethylene market. Considering the ongoing economic problems in Europe and thin buying interest in China, American sellers are not optimistic about a reversal in trend for the near term.
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