Gap between ethylene and propylene falls in Asia as spot propylene falls

16-Aug-11
Spot propylene prices have recorded steeper decreases over the past week when compared with spot ethylene prices in Asia, as per ChemOrbis. The comparatively large declines in spot propylene prices have helped narrow the gap between propylene and ethylene prices, which had reached its largest level in over a year earlier this month when spot propylene prices were trading with a premium of US$400/ton when compared with spot ethylene prices. Spot propylene prices on an FOB Korea basis have been trading at a premium of over US$100/ton when compared with spot ethylene prices on a CFR NEA basis since the first week of March. Propylene has held a premium of at least US$200/ton over ethylene since mid-May with the premium moving above US$300/ton in the last week of July. After reaching its highest point in the past year of just over US$405/ton last week, the premium sank back to US$315/ton this week as spot propylene prices were harder hit by the effects of the most recent declines in upstream costs than spot ethylene prices. Spot propylene prices on an FOB Korea basis fell by US$110/ton in the past week as buyers retreated to the sidelines following the significant reduction in energy costs seen earlier this month. Although energy costs have stabilized somewhat over the past few days and have regained some lost ground from last week’s lows, spot propylene prices continued to be weighed down by poor demand as buyers are generally hesitant to purchase in large quantities given the bearish outlook for Western economies. Spot ethylene prices on a CFR NEA basis also tumbled this week, slipping US$40/ton as demand retreated on fears of another global economic slowdown. Spot ethylene prices found some support from tight ethylene supply inside Asia. Taiwan’s CPC shutdown its 500,000 tpa No 5 cracker last week for a maintenance shutdown scheduled to last for more than a month. Formosa has also reportedly begun shut down procedures at its No 3 cracker in Mailiao, which has an ethylene capacity of 1.2 mln tpa. The scheduled maintenance shutdown at the No 3 cracker will leave two of the three crackers at Formosa’s Mailiao site offline for more than a month as the company’s 700,000 tpa No 1 cracker is expected to be shut until November following several fire outbreaks at Formosa’s Mailiao facility earlier this year.
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