SE Asian propylene soars; NE Asia’s olefins remain lackluster

Southeast and Northeast Asian ethylene and propylene prices have diverged, with the price spread widening between SEA and China/NEA propylene prices. Prices of both olefins have inverted, as SEA spot prices have climbed steadily, and for propylene, sharply higher than China/NEA prices.

Traders have been closely monitoring this developing divergence, which has initially been marginal, but over the past two weeks, has generated substantial momentum. The price spread between SEA and China/NEA propylene prices was $10-20/ton at the start of the New Year. The spread has currently widened to $70-80/ton.

SEA ethylene spot prices have edged above China/NEA prices, lifted by the shortage in the region. There is not the hot demand for ethylene as there is for propylene cargoes, which has resulted in propylene spot prices skyrocketing. Adding further impetus is the steady uptrend in PP prices, especially in SEA, which has also supported the higher bids for spot propylene.

Spot ethylene prices edged up $20/ton from last week to be assessed at $870/ton CFR China and climbed $30/ton to $880/ton CFR Southeast Asia as of January 17. In Northeast Asia, spot propylene prices were flat from last week to be assessed at $830/ton CFR China, while in SEA, active demand has resulted in a sharp hike of $80/ton, or 9.5% to $910/ton CFR as of January 17.

A dearth of supply in SE Asia

A confluence of factors has converged to propel the wide differential between SEA and China/NEA propylene spot prices. The key factor is the supply squeeze, as supply has tightened acutely, but buyers only realized the critical shortage when they tried to procure their normal monthly volumes.

The region’s olefins supply has tightened due to the extended turnarounds at Rayong Olefins and PTT Global Chemical, both crackers were to have restarted in January. Exacerbating the shortfall is the reduced production at Petronas’ 300,000 tons/year PDH plant located at Kuantan.

Additionally, Malaysia’s Pengerang Refining and Petrochemical (PRefChem), who is a key supplier of spot olefins cargoes, has limited spot propylene cargoes to offer to the spot market. The Malaysian producer had sold propylene cargo for January to Petronas, which is basically for captive consumption, noted a western trader.

PTT Global Chemical has little to offer the spot market for February, and IRPC, its subsidiary, also requires a February propylene cargo.

Pent-up demand

Meanwhile, buying interest is very active for both January and February delivery in the region. Traders noted that most of the major buyers have not covered their shortfalls for February arrival.

Lotte Chemical requires 2 to 3 propylene cargoes per month, Chandra Asri also needs around 2 propylene cargoes monthly while IRPC is searching for a February cargo. Petronas meanwhile will likely move 1 to 2 cargoes from PRefChem to Kuantan, traders commented.

“There has been a scramble for propylene spot cargoes for February delivery, with bids chasing higher and higher offers. The enquiries have reached several Chinese producers, as traders could not find products within SEA,” said a western trader. He added, “These acute shortages have driven spot prices even higher, in fact, there were rumours that a key producer had paid for a China spot propylene cargo at a sky-high price, but both buyer and seller have denied the trade.”

Traders are monitoring China/NEA propylene prices closely as the supply shortage in SEA would likely divert more China cargoes to SEA, hence raising spot prices in China indirectly.

SE Asia crackers remain in extended turnarounds

Southeast Asia’s reduced cracker and PDH operating rates have kept the region’s supply tight, and this third week of 2024 has brought on the full impact of acute supply shortage on spot propylene prices. The extended turnarounds at Rayong Olefins and PTT Global Chemical have exacerbated the region’s tight olefins supply.

Siam Cement Group’s Rayong Olefins produces 900,000 tons/year of ethylene and 450,000 tons/year of propylene, located at the Map Ta Phut Olefins (MOC) complex. The producer shut the cracker in mid-November for about two months of scheduled maintenance turnaround. The cracker should restart in early January 2024 but will now be extended into mid-February, traders commented.

Thailand’s PTT Global Chemical has shut the 463,000 tons/year (I-1) ethylene cracker for around 45 days since early October. The turnaround was slated to be in Q3, but this was postponed to October, traders said. The turnaround has been extended to late February 2024 due to poor margins, traders added. PTT Global Chemical has an olefins capacity of some 3.63 million tons/year at the Map Ta Phut petrochemical complex, located in Rayong.

PTT Global Chemical also took down the 130,000 tons/year PDH unit, located at Map Ta Phut, for a scheduled 45-day maintenance turnaround in early October. The PDH unit will also be restarted in late February.

Additionally, Malaysia’s Petronas Chemicals Olefins has cut run rates to 60-70% at its 300,000 tons/year PDH plant due to technical issues. The Kuantan-based PDH facility has been running at reduced rates since early December, traders commented.