Northeast Asia-Southeast Asia Ethylene Price Spread At All Time High

Northeast Asia-Southeast Asia ethylene price spread at all time high

09-Feb-17

The spread between Northeast Asia and Southeast Asia ethylene prices widened by US$30/mt day on day to hit a record high of plus $175/mt Wednesday, S&P Global Platts data showed. On Wednesday, the CFR Northeast Asia ethylene price marker rose US$30/mt day on day to be assessed at US$1270/mt, the highest level since July 7, 2015, when the price was assessed at US$1280/mt, while the CFR Southeast Asia price marker was assessed unchanged at US$1095/mt over the same period. Spot ethylene demand in Northeast Asia was strong this week as Chinese end-users resumed trading activities after the Lunar New Year holidays, market sources said. This week, a spot transaction was heard in the range of US$1270-1280/mt CFR Northeast Asia, compared to US$1230-1240/mt CFR Northeast Asia in the previous week.

Chinese end-users are particularly active in seeking spot ethylene cargoes currently, in a bid to cover their ethylene shortage amid the steam cracker turnaround season. In addition, positive ethylene derivatives margins helped to keep spot ethylene demand firm.
According to Platts data, the CFR China styrene monomer price hit US$1574/mt on February 3, the highest level since August 25, 2014. "Chinese styrene monomer producers can afford to pay $1,300/mt CFR for a spot ethylene cargo," said a market source this week.
Market sources said the ethylene location spread between Northeast Asia and Southeast Asia would probably remain wide, as the CFR Northeast Asia ethylene price would likely hold firm. Spot ethylene cargoes in Northeast Asia would likely remain tight, with South Korean producers still reluctant to reduce their downstream polyethylene production despite negative PE margins.

On Wednesday, the price spread between PE and ethylene was calculated at minus US$85/mt compared to minus US$55/mt the day before and a typical breakeven spread of plus US$150/mt. Wednesday's spread level is the lowest since June 29, 2015. "Some steam crackers in South Korea are due to be shut down March and April for an annual maintenance. It seems it is difficult to adjust their plant operations prior to the turnaround season," said another market source.
In March, SK Global Chemical plans to shut its 200,000 m tpa steam cracker in Ulsan for annual maintenance, while South Korea's Korea Petrochemical Industry Co., or KPIC, will shut its 470,000 m tpa steam cracker in Onsan in April.