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Asian ethylene, propylene prices remain bullish but caution lingers

by Jennifer Lee - jlee@chemorbis.com
  • 14/07/2021 (17:54)
Asian ethylene and propylene prices extended their gains into the third week amid the ongoing crude rally and firmer demand. Despite ongoing concerns with the spread of the Delta variant, the recent demand recovery seen in downstream markets appears to be gaining some momentum.

Naphtha prices have also stayed firm, bolstered by the strong crude price performance, and continue to boost ethylene prices.

Traders note that the pace of gains for ethylene has slowed, however, as prices already run up by $100/ton over the past two weeks. For propylene, prices have climbed by a relatively smaller portion , but continue to trend up steadily.

Spot ethylene prices were assessed at $985/ton CFR China and $955/ton CFR Southeast Asia on July 6, up $25/ton on the week. Spot propylene prices were assessed at $1015/ton CFR China and $985/ton CFR Southeast Asia, up $15/ton on the week.

Price gains likely to be tempered

Crude oil markets remain choppy

Oil prices have turned more volatile with uncertainty over production plans by OPEC+ after prices have soared more than 45% in the first six months of 2021. Despite growing optimism with regards to vaccination rollouts across the globe and Asia, the threats of the Delta and other variants lead to rising coronavirus infections globally and this will limit demand recovery in turn, market participants commented.

Olefins set to face oversupply

South Korea’s GS Caltex had started up its new mixed-feed cracker around June 18 but technical issues had resulted in the cracker running at full capacity only from early July. The cracker produces 750,000 tons/year of ethylene and 430,000 tons/year of propylene.

LG Chemical also achieved on-spec production for 800,000 tons/year ethylene at its naphtha cracker in Yeosu on June 11. The cracker also produces 400,000 tons/year of propylene. Production has been ramped up to 100% of capacity since early July.

Being the major importer of ethylene and propylene, China will be adding 8 ethylene crackers in 2021, with a total ethylene capacity of 7.8 million tons. This will raise China’s ethylene capacity to around 40 million tons by the end of this year, or an estimated 23% increase from 2020.

For propylene, China’s Fujian Meide Petrochemical started up its new 660,000 tons/year PDH facility in Fuzhou, Fujian in early February. Oriental Energy started up its Ningbo phase-two 660,000 tons/year PDH plant in late February, increasing its total propylene capacity to 1.86 million tons/year. For 2021, China will be adding another four PDH plants, with all six new PDH facilities contributing a total of around 3.25 million tons of additional capacity.

Asian ethylene and propylene remain firmly in contango

Traders said that H1 August and most H2 August business were concluded at the higher levels of $970-985/ton CFR NEA for ethylene, and at $1000-1015/ton CFR NEA for propylene. CFR SEA cargoes were traded at a discount of $30-40/ton to NEA prices.

Q3 turnarounds in SEA, East-West arbitrage bolster prices

Asian propylene prices continue to be bolstered by the Asia-to-Europe arbitrage. To date, some 45,000 to 50,000 tons of propylene have been shipped from South Korea, Southeast Asia and China. This week, market players heard that a new entrant, Chinese LPG trader, Baker Oil moved 4,000 tons of propylene out to Europe. This made the news as Chinese refrigerated products had not been seen shipped out of China. Meanwhile, traders and suppliers are still negotiating additional cargoes that will likely be shipped in August.

For ethylene, however, there will be less deep-sea, ex-USG/ ex-Brazilian cargoes arriving in Asia as USG prices have been rising. At around $1100/ton CFR Asia landed cost, traders said that this level has become prohibitive even for term buyers. Meanwhile, some 27,000 to 35,000 tons of deep-sea ethylene cargoes that had been shipped earlier, will arrive in Asia during August.

“Additionally, after the planned cracker turnarounds have ended in Northeast Asia by July/H1 August, Southeast Asia will start on its Q3 planned cracker turnarounds. Ethylene and propylene production losses in SEA are estimated at around 500,000 tons and 400,000 tons respectively between July and September. This makes up around 4% of total SEA olefin capacities. A potential supply shortage of olefins in Q3 will keep SEA prices well supported and also see little, if any, volumes exported to China, which will indirectly support NEA olefin prices,” said a trader.
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