Ethylene from NE Asia diverted to SE Asia on lacklustre demand from China

27-Aug-09

Trading activity has come to a virtual standstill in NE Asia on weak ethylene demand from China as talks with traders had lapsed due to a wide buy-sell gap. Cargoes intended for this region have been diverted to SE Asia in a bid for better price realisation as per ICIS. Selling ideas were pegged at up to US$1020-1030/ton (€714-721/ton) CFR NE Asia for cargoes arriving in September while buying ideas in the region hovered in the low to mid US$900s/ton CFR NE Asia. Expected cracker start-ups have also added to expectations of abundant domestic supplies and Chinese buyers have no incentive to seek spot cargoes. Lack of demand from China has left the northeast Asian market without direction for the third consecutive week. Chinese processors do not have supply concerns as domestic crackers are running at high operating rates averaging 90-100%. Shanghai Secco Petrochemical’s newly expanded 1.2 mln tpa cracker in Caojing is running at near capacity. Fujian Refining and Petrochemical Co (FREP) is expected to start up its new 800,000 tpa naphtha cracker in Quanzhou by the end of the month. Prices in southeast Asia, have, however, risen by US$20-40/ton to US$1030-1060/ton CFR over the same period, n comparatively healthier demand partly due to the continued delays in the delivery of term cargoes from Iran due to cracker shutdowns early this month. Iran is the largest Middle-eastern supplier of ethylene to the region. It exported 680,000-700,000 tons of ethylene in 2008 but sales volumes are expected to fall to 450,000-500,000 tons this year due to planned and unplanned cracker outages. Gas feedstock shortage at Assaluyeh in southern Iran had also capped plant operating rates at 50-60% for the most part of 2009. Spot supply from Korea was limited with bulk of its ethylene output being fed into derivative polymer plants that were running hard on the back of healthy export demand but Japan has cargoes available due to turnarounds at downstream plants in September and October. Discussions between producers and traders were heard in the low US$900s/ton on FOB (free on board) basis although some market participants said there had been deals done below these levels. September is (the end of) the first half accounting period in Japan so inventories should be reduced.