Spot ethylene, propylene prices move lower in Asia

31-May-11
Spot ethylene and propylene prices in Asia have posted significant declines over the past week to reach their lowest levels since the first two months of the year as per ChemOrbis. Slower downstream demand was cited as the main factor behind the decline in spot prices along with the fact that crude oil and naphtha prices are trading well below their early month highs. Spot ethylene prices on a CFR Northeast Asia basis have fallen by around US$50/ton over the past week to reach their lowest levels since the middle of January. When compared with the start of the month, spot prices on a CFR Northeast Asia basis are down by around US$120/ton. Market sources pointed to poor demand for major ethylene derivatives such as PE as the main reason for the decline in prices, adding that steam cracker operators in the region will need to consider reduction in operating rates to remove excess supplies from the market if demand does not begin to pick up soon. According to data from ChemOrbis Price Index, spot prices for LDPE film on a CFR China, cash basis have fallen by US$20-40/ton since the first full week of May while HDPE film prices have lost US$40-50/ton and LLDPE film prices have declined by US$50-70/ton over the same time period. The majority of overseas HDPE and LLDPE film producers are currently operating below their theoretical production costs based on spot ethylene prices as PE prices have been pulled lower by poor demand, helping to reinforce the downward movement in ethylene prices. In the propylene market, spot prices on an FOB Korea basis have dropped by US$75/ton over the past week, reaching their lowest level since late February. When compared with the start of the month, spot propylene prices have come down by around US$130/ton. In addition to slower derivative demand, propylene prices have been pushed lower by rising supply levels from both Japan and South Korea. Crackers in South Korea are beginning to return to normal operations following a heavy cracker maintenance season while the restart of some crackers in Japan which had been shut following the massive earthquake on March 11 reduced demand from buyers looking to cover the shortage of Japanese cargoes. According to data from ChemOrbis Price Index, spot prices for homo-PP injection and raffia on a CFR China, cash basis have lost $40-80/ton since the first full week of May, leaving most overseas homo-PP producers operating below their theoretical costs based on spot propylene prices even after the recent declines in propylene prices.
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