Spot ethylene prices drop as global buying interest recedes

13-Sep-11

Last week saw spot ethylene prices declining across the globe on lackluster downstream demand, as per ChemOrbis. Sellers’ hopes to see better demand from Europe and Southeast Asia following holidays in these regions, has been dashed. An unexpected shutdown at Shanghai Secco’s cracker and petrochemical complex in China has had little effect on demand from Asian buyers, as also several upcoming scheduled shutdowns in the US have also failed to spur any additional buying interest. In Asia, spot ethylene prices on a CFR NEA basis were reported notionally lower by around five dollar/ton this week. Players attributed the slide in prices to lackluster demand and limited trading activity, adding that buyers and sellers are far apart in their price ideas at the present. The unexpected outage last week at Shanghai Secco’s 1.09 mln tpa ethylene cracker has not made much of an impact on market sentiment, partly because some players believe the shutdown will be of limited duration assuming the fire damaged parts can be quickly repaired. Slow demand for major derivatives such as PE and PVC has also weighed down on spot ethylene prices and most players comment that they do not expect to see any major changes in demand over the near term. In Europe, spot ethylene prices were notionally softer over the past week. Sources reported that demand has yet to pick up as expected following the summer holidays in August and that derivative demand has also been disappointing in the first few weeks after the holidays. Several PE and PVC producers have indicated that they are considering lowering their operating rates in order to compensate for reduced demand. Cracker operators complained that slower demand has eaten into their margins, and they are considering reducing operating rates over the near term if margins do not improve. In the US, spot ethylene deals for September declined by around US$55-60/ton when compared with the previous week while some initial October spot deals were reported around US$15-30/ton lower than the most recent September deal levels. Traders attributed the drop in spot prices to slower than expected downstream demand. At least two crackers in the US Gulf region are scheduled to begin maintenance shutdowns soon but this news has not yet generated any additional buying interest.