Asian ethylene-naphtha spread at widest in 4 years despite deep sea supply

19-Sep-14

The Asian ethylene-naphtha spread widened US$16.50/mt day on day to US$683.38/mt on September 18, driven by bullish ethylene despite an expected influx of deepsea European ethylene supply, Platts data showed. The spread was last wider last on February 2, 2010 at US$691.38/mt. The CFR Northeast Asia ethylene benchmark rose $10/mt from Wednesday to be assessed at $1,550/mt Thursday, while the CFR Japan naphtha price dropped $6.50/mt to $866.63/mt during the same period. About 20,000 mt of ethylene has been fixed to load from Europe in late September and early October and head for Asia, as per traders. Since the arbitrage window remained open from Europe, some trading sources said they expect more cargoes to be fixed from the West. Asia's spot ethylene demand is currently high due to a regional shortfall amid the annual maintenance season. In South Korea, LG Chem plans to shut its 1 mln tpa naphtha-fed steam cracker in Yeochun for one month of annual maintenance from October 22, and Yeochun Naphtha Cracking Center plans to shut its 470,000 mt/year No. 3 naphtha-fed steam cracker at Yeosu on September 22 for around a month of annual maintenance. Despite expected deepsea supply, the CFR NEA ethylene price remained bullish due to high freight costs. Trading sources said high freight rates and limited vessels availability in Europe kept deepsea offer levels relatively high. Sources estimated typical freight from Europe to Asia at $400-450/mt. Considering the FD Northwest Europe ethylene price of $1,174.63/mt Thursday, deepsea sellers would need to sell their Europe-origin ethylene cargoes at least around $1,580/mt CFR Asia to generate profit.