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Asian ethylene sustains rally, moves back above LDPE, LLDPE in China, SEA

by Merve Madakbaşı -
  • 15/02/2019 (09:21)
Ethylene prices have hit a 4-month high on CFR Far East Asia basis this week upon steadily rising since mid-January, the weekly average data from ChemOrbis Price Wizard suggested. This pushed spot ethylene back above LDPE and LLDPE prices in China and Southeast Asia after around 3 months.

Uptrend kicked off in January due to healthy buying, low supply

The main drivers behind the climbing ethylene market were cited as limited availability and healthy buying interest from players in China. Demand from styrene producers particularly increased in the period before Lunar New Year holidays.

Spot ethylene soared by 30% since 2019 started

The delta between spot naphtha and ethylene prices widened to almost $640/ton, which pointed to the highest gap since September 2018, as can be seen on the graph below obtained from ChemOrbis Price Wizard. This also verifies that the 30% surge of ethylene was mostly driven by supply-demand dynamics rather than upstream naphtha prices, which have held almost flat on CFR Japan basis since mid-January.

Around 3 mil tons of capacity is set to be offline in March-June

Several steam crackers in China, South Korea and Japan are readying for planned turnarounds in March-June. This is likely to keep overall ethylene supplies restricted across Asia in the second quarter of the year. Approximately 3.3 million tons/year ethylene capacity will be taken offline in total albeit for different durations within the next few months.

Rising ethylene lends support to import PE markets

Rapidly rising spot ethylene prices also provided support for downstream PE producers. Import PE prices in China and Southeast Asia have recently been steady to $10-20/ton higher when compared to the last week prior to Lunar New Year holidays. According to players, bullish ethylene prices counterbalanced the ongoing holiday lull and ample supplies.

Ethylene moves around $100 above LDPE, LLDPE again

The weekly average data from ChemOrbis revealed that spot ethylene prices on CFR FEA basis are currently carrying a premium of around $100/ton over import LDPE and LLDPE film offers both in China and Southeast Asia.

Ethylene already traded well above LDPE, LLDPE in Jan-Oct 2018

Despite the fact that ethylene should theoretically trade below PE prices under balanced market conditions, it stood well above import LDPE and LLDPE prices across Asia throughout the first 10 months of 2018. After trading below PE prices for the last three months, spot ethylene prices have again climbed above LDPE and LLDPE recently, based on the weekly average of ChemOrbis Price Index.
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