European ethylene prices to ease with increased supply, softening downstream prices in Asia

15-Feb-10

Ethylene prices in Europe could have passed its peak for 2010 as improved cracker operations ease the supply situation and derivative prices weaken in Asia, as per ICIS. Supplies have been limited in December and January mainly due to unexpected outages at three crackers over the Christmas and New Year break. Ethylene had been viewed as balanced-to-short, as higher prices in Asia also provided support through export opportunities, alongside restocking amid bullish market outlook for January and February contract settlements. Unplanned cracker outages at BASF in Antwerp and Ludwigshafen, and at INEOS’ site in Cologne have been resolved. Since crackers in Europe are gradually improving operating rates, ethylene is expected to come down by next month from its current levels of €US$1120-1135/ton. Cracker operators could make a good margin at these levels, so they were enticed to operate at run rates as high as technically possible. Ongoing weakness in derivative demand because of the Lunar New Year holidays have brought down Asian spot ethylene from 17 month peak of US$1400/ton to US$1320/ton CFR SE Asia. Much will depend on the export opportunities presented to European derivatives following the Lunar New Year holidays. Also, concerns about the impact of new capacities in the Middle East and in Asia are expected to mount in the second half of the year.