Steep decline in Asian ethylene margins triggered by weak polyethylene market in China

A steep decline in Asian ethylene margins seems to have been largely triggered by the perturbing state of China's polyethylene (PE) market as per ICIS at the time of a supply glut in the region. PE operating rates have been reduced in Saudi Arabia, resulting in increased availability of merchant ethylene, while surplus material is available from Shell Chemicals complex in Singapore with the commissioning of the 800,000 tpa steam cracker- both these factors contribute to the supply surplus. Ethylene margins in Northeast Asia (NEA) had recovered to US$161/ton on 25 June from US$101/ton on 18 June on cheaper naphtha, according to the ICIS report. Despite the recovery in ethylene margins on 25 June, the NEA average for Q1 was US$474/ton with the downtrend ominously paralleling that which occurred in 2001. Interestingly, the nameplate capacity due on-stream for the remainder of this year is in excess of likely global growth. However, as seen over the past year and a half, start-up delays and OPEC oil output restrictions that have reduced feedstock supply to existing Saudi Arabian plants - could change the picture.
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