Spot ethylene gains ground in Asia and USA, slides in Europe

The past week has seen spot ethylene prices move higher in both Asia and the US on supply concerns in these regions, as per Chemorbis. Higher crude oil and naphtha prices are also exerting upward pressure on global ethylene prices, although spot ethylene moved lower in Europe as lackluster demand amid European cracker operators’ hesitance to reduce run rates overshadowed rising upstream costs. In Asia, spot ethylene prices on a CFR NEA basis gained US$70/ton over the past week as Chinese buyers have been actively scouting for overseas cargoes to help offset an ethylene shortage in the country. Sources estimate that China’s ethylene production has waned by approximately 10% from the previous month as a surge in demand for fuel oils has resulted in a shortage of naphtha inside the country. Prospective delays in the delivery of import shipments have also helped push up spot prices in the region as China’s port authorities are giving priority to vessels delivering gasoil and naphtha shipments. Stronger upstream costs have also played a role in the upward movement in Asian ethylene prices, as ethylene producers complain that they are struggling to cover their production costs given the current spread between spot prices for ethylene and naphtha in Asia. In the US, spot ethylene prices gained US$28/ton over the past week on the strength of limited availability resulting from a number of production outages within the region along with stronger upstream costs. Shell declared force majeure on ethylene supplies out of its 544,000 tpa cracker in Norco, Louisiana after the company was forced to shut down the unit owing to a technical problem at the facility. The production difficulties at Shell’s cracker along with rumors that the US November ethylene contracts were settling with US$176/ton increases provided some support to the spot market, although the recent restart of Williams’ 544,000 tpa cracker helped to partially offset the impact of the news about Shell’s force majeure. Spot ethylene prices lost ground in Europe over the past week, being nominally quoted at prices €25-30/ton below the spot range reported in the previous week. While European cracker operators are also said to be struggling with margin pressures resulting from escalating crude oil and naphtha costs, most cracker operators have proven unwilling to reduce their run rates given healthy demand for propylene and butadiene. Steady production from Europe pushed spot prices downwards over the past week as spot demand is quite limited in the region owing to year-end bookkeeping concerns.