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Asian ethylene stable amid more US cargo arrivals; China propylene edges up

by Jennifer Lee -
  • 12/04/2024 (02:36)
Northeast and Southeast Asian ethylene prices have stayed flat this week despite the threat of increased ex-US Gulf ethylene cargo arrivals into China/NEA for June, and trader reports that more cargo fixtures are under negotiations for July arrival. China’s propylene prices have edged higher on some short covering for late April delivery, commented traders.

US Gulf-to-Asia arbitrage may pressure Asian ethylene prices in June

Asian ethylene prices had climbed since mid-January, and the price uptrend had attracted increased interest from traders to ship ex-USG ethylene cargoes to Asia to capitalize on the widening arbitrage between the two regions. The arbitrage window has remained open and recently gained momentum as the Panama Canal congestion has eased. The earlier lack of vessels and shipping options, given the Panama Canal congestion and Red Sea tensions had limited the volumes of cargo fixtures for March.

There has now been a steady climb in the amount of ex-USG ethylene cargo arrivals into Asia for June and likely more volumes will be fixed for July arrival as well, traders said. Traders said the cargo fixtures had doubled for May, from an estimated 37,000 tons that arrived in NEA/China in April, to around 69,000 tons that will arrive in Asia in May. For June arrival, traders estimated around 98,000 tons of ethylene cargoes have been loaded and are on the waters to Asia.

Traders commented that the ex-USG ethylene cargoes were sold at around $930-940/ton CFR Asia for June arrival. The offers for regional cargoes were quoted in the high $900s CFR NEA/SEA while buying interest remained at the low $900s/ton CFR level.

“We expect that in the second half of 2024, there will be more shipments that will come through the Panama Canal. We’re already seeing traders willing to risk going northbound (to Houston) via the Panama Canal, which was previously inconceivable. Additionally, more traders will be willing to participate in the Panama auction slots as well,” noted a western trader.

“While production margins continue to be squeezed, and regional producers would like to raise Asian ethylene prices, the presence of cheaper, ex-USG cargo options for May and June, will likely limit the price upside,” he added.

NEA/China ethylene prices have also been holding at the $930-940/ton CFR range as there are still several Q2 and upcoming Q3 plant maintenance turnarounds that will keep regional olefins supply tight. Satellite Chemical’s 1.25 million tons/year Lianyungang-based ethane cracker will remain in shutdown from early April through late May. Zhejiang Petrochemical’s Zhoushan-based 1.4 million tons/year ethylene cracker will also remain in turnaround for about 40 days until the first half of May.

NEA propylene prices edge higher

NEA propylene prices had risen slightly on short covering by traders to Chinese contract buyers for late April delivery, noted a western trader. SEA spot propylene prices enjoyed a temporary reprieve this week, having been pressured by active selling from regional producers in Malaysia and Singapore for the past weeks. Malaysia’s Pengerang Refining and Petrochemical (PRefChem) is a key supplier of spot olefins but had stopped offering spot propylene cargoes as the 1.29 million tons/year naphtha cracker at the RAPID complex had been shut for a month-long maintenance turnaround in late March.

NEA spot ethylene prices were unchanged from last week to be assessed at $930/ton CFR China, whilst robust demand continues to underpin SEA spot ethylene prices, assessed at $1010/ton CFR Southeast Asia as of April 11. NEA spot propylene prices edged up $10/ton from last week to be assessed at $850/ton CFR China, whilst SEA spot prices were stable, assessed at $850/ton CFR SEA as of April 11.

China - ethylene - propylene - Southeast Asia

S. Korea’s producers cut run rates as naphtha prices climb

Northeast Asia’s olefins supply had expanded in February and March when more South Korean producers ramped up cracker operations, attracted by the higher netbacks in ethylene, as spot prices had been risen from $850/ton CFR NEA/SEA in early January, to $950-960/ton CFR NEA/China by early February.

The higher cracker run rates have lengthened the region’s supply and the longer supply placed prices under some downward pressure. Currently South Korean producers are facing higher naphtha costs, as spot naphtha prices have stayed around the $705-715/ton CFR Japan level. The naphtha-ethylene spread narrowed to just over $200/ton. With production margins again getting squeezed, several South Korean producers have already cut cracker run rates.

South Korea’s Hanwha Total Petrochemical has reduced operating rates at the 1.4 million tons/year Daesan-based cracker in early April, commented traders. The cracker is currently operating at around 80-85%, they added.

Ulsan-based Korea Petrochemical Industry Co (KPIC) has also cut cracker operating rates by 5-10% from the current 90%, traders commented. The company produces 800,000 tons/year of ethylene and 510,000 tons/year of propylene at the Onsan cracker.
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