Asian ethylene and propylene prices reverse losses on short-covering, tighter supply

Asian ethylene and propylene prices have finally rebounded following a ten-week downtrend, with both olefins rising this week, lifted by a mix of short-term factors, according to traders. These include the short-covering of July contract cargoes to mostly Chinese end-users, and, for propylene, supply disruptions in China, as well as in South Korea.

Spot olefin markets edge up, yet cautiousness remains

Traders who had previously sold at lower levels to Chinese buyers for arrivals in the first half of July were said to have bought at higher prices in the spot market, to cover their shorts. A key Japanese trader had reportedly bought spot ethylene cargoes at $730/ton CFR China, while Chinese traders were said to have bought spot propylene cargoes at $730-740/ton CFR China for early July arrival. Chinese traders were said to have been squeezed by tighter propylene supply in China due to several technical outages at PDH plants, as well as the delayed restart of a South Korean PDH plant.

Traders have remained cautious, however, reiterating that a sustainable longer-term price recovery will still depend on demand and pricing recovery in downstream polyolefin markets, which have remained sluggish. Additionally, for ethylene, there is still pressure from the deluge of deep-sea, ex-USG ethylene cargo arrivals into Asia, landing in late June and for most of July. Additionally, offloading of surplus July volumes is still ongoing, with key producers such as Malaysia’s Pengerang Refining and Petrochemical (PRefChem), Saudi Arabia’s PetroRabigh, and Formosa Petrochemical still reported to be offering cargoes via tender for loading in H1 July.

Spot ethylene prices edged up $10/ton from last week, and were assessed at $730/ton CFR China and at $750/ton CFR Southeast Asia, as of June 28. Spot propylene prices rose $20/ton from last week, and were assessed at $740/ton CFR China, and at $760/ton CFR Southeast Asia, as of June 28.



China’s PDH plants shut due to technical issues, tightens July C3 supply

Northeast Asia’s and China’s olefins supply has lengthened due to the restarts of various crackers and PDH plants. However, technical outages and an unscheduled shutdown at three PDH facilities have unexpectedly tightened July supply, leading to a scramble for propylene cargoes by traders for delivery in H1 July to Chinese end-users. Additionally, Guangxi Huayi’s 750,000 tons/year PDH plant remains under maintenance.

Shaanxi Yanchang Petroleum and China Gas Holdings’ new 600,000 tons/year PDH facility had only started up at the end of May this year. The PDH plant ran into technical issues around mid-June and had been shut, with a restart likely to be in early to mid-July, according to industry sources.

The joint-venture project, located in Taixing, Jiangsu province, comprises two phases. The first phase involves the construction of a 600,000 tons/year PDH plant, with no downstream units. The second phase will add another 600,000 tons/year of propylene, taking the total propylene capacity to 1.2 million tons/year, and with a production of some 300,000 tons/year of polypropylene and other downstream products.

Private sector producer Shandong Xintai’s 300,000 tons/year Zibo-based PDH plant suffered from compressor issues on June 18 and was also shut. No restart date has been confirmed so far, but traders anticipate the outage to last two to three weeks at the very least.

Zhejiang Satellite’s 450,000 tons/year PDH facility based in Jiaxing, East China, had been shut since mid-June for an unscheduled turnaround and is likely to restart only in mid-July, traders said.

Meanwhile, Guangxi Huayi New Material Co’s 750,000 tons/year PDH facility remains under maintenance, and will likely be restarted in mid-July, according to industry sources. The 750,000 tons/year Qinzhou-based PDH plant was only started up in February this year. The Chinese producer also owns a 300,000 tons/year PP plant located in Guangxi with joint-venture partner Zhejiang Hongjin Petrochemical.