Asian ethylene market ends September on firm note

Spot ethylene prices in Asia recorded increases throughout the past week before stabilizing on Friday. Surging costs were mainly driven by still tight spot availability as well as better demand in the region. These increases also found support from the gains in spot naphtha prices in the period and rebounding energy prices in the last two working days of the week.

Crude oil prices on NYMEX fell below the $90/barrel threshold in the middle of last week, the first time since early August, before rebounding to settle over this threshold during the last two working days of the week. Contracts for November delivery settled at $92.19/barrel on Friday indicating a loss of less than $1/barrel week over week, although crude oil futures lost around $3/barrel during September. As for naphtha costs in Asia, prices soared nearly $30/ton on CFR Japan basis over the week although they stood $20/ton below early September levels.

Meanwhile, spot ethylene prices moved noticeably higher in Asia. Spot ethylene offers surged last week by $50/ton on CFR Northeast Asia basis, while they represented a larger increase of $75/ton on CFR Southeast Asia basis with respect to the previous week.

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Spot availability in the region reportedly remained tight due to the restricted supply at Formosa Petrochemical. The Taiwanese major decided to lower their operating rates to 80% capacity at their 3 crackers at the Mailiao complex. The decision was due to a fire at Nan Ya Plastics’ No.4 MEG plant which occurred on September 26 and caused the company to shut the 700,000 tons/year plant. Formosa’s crackers normally produce approximately 2.93 million tons/year of ethylene in total. According to market sources, Nan Ya Plastics plans to keep the plant down for around 3 weeks.

Apart from Formosa’s unplanned decision, Taiwanese CPC Corporation reduced the operating rates of its 380,000 tons/year cracker to 80-85% by mid-September citing government inspections. Japanese Idemitsu Kosan was planning to restart its Tokuyama cracker at the end of October after shutting it in the first half of last month for a scheduled maintenance. The cracker is able to produce 623,000 tons/year of ethylene under normal circumstances.

On the other hand, some crackers returned from maintenance in China in the last week of September which may provide relief in availability in the coming days. Sinopec Sabic Tianjin Petrochemical, Sinopec Yangzi and Tianjin Petrochemical resumed operations at their crackers following planned maintenance shutdowns that started in July and August. The crackers can produce 1 million tons/year, 350,000 tons/year and 200,000 tons/year of ethylene, respectively.