Ethylene-Naphtha Spread In Asia Rises By Over US$22/Mt To Peak To 3 Month High

Ethylene-naphtha spread in Asia rises by over US$22/mt to peak to 3 month high

29-Aug-16

The price spread between ethylene and feedstock naphtha rose by US$22.05/mt day on day to US$802.3/mt on Thursday, rising to almost 3 months high. On May 10, the spread was calculated at US$805.75/mt, S&P Global Platts data showed. Thursday saw CFR Japan naphtha benchmark dip by around 2 dollars day on day to be assessed at US$397.6/mt, while the CFR Northeast Asia ethylene price spiked by US$20/mt to a 4 month high of US$1200/mt, according to Platts data. The Asian ethylene market started a sharp rebound from mid-August after all the deep sea cargoes; mainly from the Middle East; found their final destinations.

Even after all the Middle East cargoes were sold, ethylene end-users in Asia, especially China, continued to seek spot cargoes on the back of bullish ethylene derivatives markets. For example, the Asia styrene monomer margin is still in positive territory -- calculated at +US$14/mt on Thursday, despite the sharp increase in ethylene prices, Platts data showed.
"I heard ethylene inventory, especially in China, is low for September. Spot demand is very strong," said a trading source Thursday.
On the spot supply side, Asia-origin cargoes were also reported to be limited due to the steam cracker turnaround season in Asia, which started from August.
Taiwan's Formosa Petrochemical shut its 1.03 mln mt/year No. 2 naphtha-fed steam cracker at the end of July for annual maintenance. The cracker will be shut until September 22. Japan's JX Nippon Oil and Energy will also shut its 404,000 m tpa steam cracker in Kawasaki from August 2 to September 28 for annual maintenance.

Looking forward, however, some market sources said the Asian ethylene market would turn bearish for October business, as China's spot demand typically weakens due to the National Day holiday season early that month. In addition, the recent strength in the Asian ethylene market has once again sparked interest to move deep sea cargoes to Asia. According to a shipping report, two cargoes totalling 130,000 mt are due to be loaded late September from Saudi Arabia, to Asia. Meanwhile, deep sea supplies from the US to Asia would likely remain limited amid a bullish ethylene market there. On Thursday, the FD USG ethylene price rose US$11.03/mt day on day to be assessed at US$859.80/mt, Platts data showed. The location spread between the US and Asia was calculated at US$340/mt Thursday, lower than the typical freight cost for that route at US$350-400/mt.