Ethylene-Naphtha Spread Rises By Over US$20 On Day To Peak To Three Month High

Ethylene-naphtha spread rises by over US$20 on day to peak to three month high

26-Aug-16

The Asia price spread between ethylene and feedstock naphtha rose US$22.05/mt day on day to US$802.38/mt Thursday, the highest level since May 10, when the spread was calculated at US$805.75/mt, S&P Global Platts data showed.
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 plus 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, Platts previously reported. 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 deepsea cargoes to Asia. According to a shipping report, two cargoes totaling 130,000 mt are due to be loaded late September from Saudi Arabia, to Asia.
Meanwhile, deepsea supplies from the US to Asia would likely remain limited amid a bullish ethylene market there.