Polyethylene-Ethylene Spread In Asia Flips To Positive Amid Falling Ethylene, Stable PE

Polyethylene-ethylene spread in Asia flips to positive amid falling ethylene, stable PE

03-Oct-16

The spread between polyethylene and feedstock ethylene flipped to positive on last Thursday, with the spread calculated at plus US$20/mt compared to minus US$35/mt on the previous day, S&P Global Platts data showed. This is the first time since August 17 this year that the spread flipped to positive. Typically, non-integrated PE producers need a US$150/mt price spread to breakeven.
The PE-ethylene spread has been in negative territory most of the time since the second quarter this year in line with a bullish ethylene market.

The Asian ethylene market had firmed amid tight supplies due to steam cracker shutdowns earlier this year, with the CFR Northeast Asia ethylene marker assessed at US$1200/mt on April 8, the highest level since July 15 last year when it was assessed at US$1205/mt, Platts data showed. But this week, the Asian ethylene market has dropped quickly, pressured by fading demand in China ahead of the National Day holidays over October 1-9. On Thursday, the CFR Northeast Asia ethylene marker plunged US$55/mt day on day to be assessed at US$1100/mt. So far, the impact from Shell's force majeure on ethylene was minimum due to weak demand in China, market sources said. Shell shut its 960,000 mt/year steam cracker in Pulau Bukom, Singapore, Tuesday afternoon due to a compressor problem, which led it to declare a force majeure on ethylene Thursday. On the other hand, film-grade high density PE price was assessed at US$1120/mt Thursday, unchanged from a day before.

The Asian PE market was bearish, especially with China's PE plants currently running at almost full capacity following the G20 Summit meeting in Hangzhou over end-August and early September. The Chinese government had ordered petrochemical plants in China to reduce their operations in a bid to improve environmental conditions during the G20 events. But the Asian PE market was relatively stable compared with ethylene. Some market sources said PE demand might pick up a little in the fourth quarter as end-users look to manufacture more food packaging and shopping bags in time for the year-end festivities.
Meanwhile, in line with the quickly falling ethylene market, the ethylene-naphtha price spread also dived US$71.25/mt day on day to $689.125/mt Thursday, according Platts data.