Spot ethylene rises in Asia, propylene slides

20-Feb-12

Last week saw spot ethylene prices in Asia posted strong gains over the past week while spot propylene prices have lost ground, as per ChemOrbis. Bullish sentiment and comparatively tight supply were said to be supporting the ethylene market while lackluster derivative demand weighed down on propylene prices. Downstream, Asian PE and PP prices stepped back somewhat over the past week after posting significant increases immediately after the Chinese New Year holidays as demand has not been as robust as sellers had hoped and converters are offering increasingly stiff resistance to additional price increases. In the ethylene market, spot prices posted strong week over week gains of US$60-100/ton, bringing the cumulative increases in spot ethylene prices to US$100-150/ton when compared with the start of February. Spot ethylene prices on a CFR Northeast Asia basis are currently trading at their highest levels since May 2011. Bullish sentiment and relatively limited supply were cited as the main factors pushing spot ethylene prices higher over the past week. Traders commented that sellers are seeking still larger increases on their spot offers but that buyers are hesitant to accept any further price increases for now. Several players speculated that the current spot prices would not prove sustainable over the medium term as derivative demand is not all that strong and prices for derivative products such as PE and MEG lost some ground over the past week. In the propylene market, spot prices on an FOB Korea basis slid US$40/ton over the past week after prices had risen to their highest levels since September 2011 in the first few weeks after the Chinese New Year holidays. Players attributed the drop in spot propylene prices to lackluster PP demand, commenting that spot PP prices on a CFR China basis were trading at close to par with the prevailing spot propylene prices this week and that PP sellers were not very optimistic about their ability to achieve higher prices over the short term. Propylene supply was said to be sufficient in Taiwan over the past week, which also contributed to downward pressure on spot propylene prices.