NEA olefins fall further as China’s Golden Week halts demand; SEA finds stability

This week, with most Chinese market participants on holiday for National Day Golden Week, spot ethylene and propylene prices in Northeast Asia (NEA) slipped due to absent demand. Bearish sentiment, which had already persisted, was exacerbated by this week’s dried-up activity. Meanwhile, oversupply remains a key factor in Southeast Asia and China, where olefins supply has increased with the restart of multiple MTO and PDH plants. Additionally, surplus ethylene in South Korea has led to aggressive offers across SEA and China, pushing down bids and spot prices further.

SEA ethylene and propylene prices managed to hold steady this week, following the previous weeks of successive declines, especially for propylene. Bids for SEA propylene had fallen to $780/ton CFR SEA whilst offers have held around $810-820/ton CFR.

According to data from ChemOrbis Price Wizard, the price spread between CFR SEA and CFR China ethylene has widened to $120/ton, the largest since late April. CFR SEA propylene is now at a narrower discount of $35/ton to CFR China.

NEA olefins fall for 4th straight week

NEA/China spot olefin prices continued to decline for the fourth week. Ethylene dropped by another $20/ton, reaching its lowest level since August 2023, while propylene slipped by $5/ton, maintaining its lowest level since January 2024. With Chinese buyers having restocked ahead of Golden Week, demand was largely absent. Domestic producers also slashed offers, further pressuring local prices. Additionally, weak demand and falling derivative prices have led to reduced production from PE, PVC, SM, and MEG producers, with PP and ACN producers similarly cutting back.

Within China, domestic ethylene prices dropped last week, with some truck-based transactions in East China reported between CNY7100-7200/ton, down CNY200-300/ton from the previous week.

Meanwhile, South Korean suppliers continue offering spot ethylene cargoes into China and Taiwan. Rising inventories in South Korea, due to reduced domestic consumption, have driven these offers. South Korean producers of key derivatives, such as PE, PVC, SM, and MEG, have also reduced operating rates in response to bearish demand.

Spot propylene prices have held up better than ethylene due to fewer cheap import offers into China. However, ample domestic supply has kept buyers cautious. Key derivative producers such as acrylonitrile (ACN) and PP producers have also reduced production rates, resulting in faltering demand for propylene feedstock. Domestic propylene prices in China remained stable, with spot business conducted at around CNY6700/ton last week.

As of October 2, spot ethylene prices were assessed at $820/ton CFR China, down $20/ton from a week earlier, while spot propylene slipped $5/ton to $840/ton with the same terms.

SEA ethylene, propylene prices stabilize

In Southeast Asia, spot propylene prices found relief after five weeks of declines, having fallen by a total of $105/ton or 11.5% during that period. Though some traders speculated that prices might fall below the $800/ton mark, others believe they will remain at or above $800/ton due to the significant negative spread between production costs and current spot prices. Traders anticipate a narrow price band for propylene in October, around $800-850/ton CFR SEA.

Production costs are much higher, with October propane prices currently at $676/ton, plus a conversion cost of $250/ton, leading to a break-even cost of $926/ton. Some traders expect propylene prices to stay near $800/ton due to this cost structure.

SEA ethylene prices held steady at $940/ton CFR this week, with few spot offers available, according to a local trader. Traders see ethylene prices as holding well relative to propylene prices for most of October. Meanwhile, bids were below $940/ton but offers were around $970/ton CFR or higher.

As of October 2, spot ethylene prices were assessed at $940/ton CFR SEA, unchanged from last week, while spot propylene remained stable at $805/ton CFR SEA.

NE Asia supply remains tight as crackers stay in turnarounds in Q4

Despite China’s expanded olefins supply, NEA supply remains tight due to maintenance turnarounds in Taiwan, South Korea, and Japan. Producers in the region have been cautious, managing supply to maintain equilibrium. Crackers across these countries are operating at lower rates.

In Taiwan, Formosa’s No 2 naphtha cracker, with an ethylene capacity of 1.035 million tons/year and a propylene capacity of 515,000 tons/year, was shut for maintenance in early August. There is no fixed restart date, according to traders.

South Korea’s GS Caltex, the second largest refiner after SKGC, took down the Yeosu mixed-feed cracker in late September for maintenance and debottlenecking. The cracker will remain in shutdown until late November, said traders. The cracker, which was started up in June 2021, produces 750,000 tons/year of ethylene and 350,000 tons/year of propylene. After debottlenecking, the ethylene capacity will likely be increased to 900,000 tons/year, commented traders.

Japan’s Mitsui Chemical shut the Sakai-based 600,000 tons/year ethylene cracker in July for maintenance. The cracker has remained in turnaround, and this will now be extended to October, or longer, depending on margins, traders noted.