Rare moves for ethylene possible as other arbs open

23-Apr-14

Since early February, Western ethylene cargoes have been coming into Asia amid tight supply in the region and an oversupply in Europe, traders said in Platts. Total European ethylene imports into Asia till date were about 60,000 mt. The CFR Northeast Asia and CFR Southeast Asia ethylene markers were assessed at US$1420/mt and US$1465/mt, respectively, April 15, while the CIF Northwest Europe price was assessed at US$1170/mt. Given an intra-Europe freight of US$70/mt, traders estimated the ethylene price to be around US$1100/mt on an FOB Northwest Europe basis. With freight from Europe to Southeast Asia and to Northeast Asia pegged around US$300/mt and US$330/mt, respectively, traders could earn a profit of around US$20-35/mt. In a rare move, traders were also looking at bringing Mexico-origin ethylene into Asia, Platts reported previously. Typically, Mexican ethylene lands in Europe, but with the recent weak prices there, traders were looking to send material to the tightly supplied and more attractive Asian market. Shipping and trading sources expect freight cost from Mexico to Southeast Asia to be around US$400-500/mt, depending on vessel availability. The only challenge facing them was securing a vessel at a reasonable rate for the month-long journey to Asia. As this is not a typical route, ship owners would not likely be willing to take such a risk, as they would not want the vessel to be empty when returning. But with the butadiene arbitrage from Asia to the US opened since early February and the arbitrage route to send Asian propylene to Europe open since April, those vessels need not return empty now. The vessels carrying ethylene can also carry butadiene or propylene on their way back, once they are cleaned or purged. The cost of purging a vessel varies depending on where the purging is taking place and whether the vessel has a nitrogen generator. In Asia, the cost for purging a 3,500-mt vessel is around US$30,000 and that for a 9,000-mt vessel is around US$80,000, said shipping and trading sources.