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Spot ethylene markets rally on diminishing supply in Asia, Europe

by Pınar Polat -
  • 26/05/2020 (09:22)
After witnessing steady losses since late January, both Asian and European spot ethylene markets have been on a rally recently owing to reduced supply amid planned and unplanned shutdowns across the regions.

Uptrend kicked off earlier in Asia than Europe

Having rebounded from their record-low levels in the second half of April, spot ethylene prices on CFR China basis have extended their gains into the fourth week. According to ChemOrbis Price Wizard, spot prices jumped $320/ton or 90% within this period.

Spot prices on FD NWE basis, on the other hand, turned upwards by early May after seeing their lowest levels since ChemOrbis started to compile data in 2007. Spot prices gained $161/ton or 53% in the past two weeks, ChemOrbis data also show.

What causes a rally after several months of declines?

The rally in both markets have been mainly supported by diminishing supply. While the Asian market has been tightening in line with some cracker shutdowns in China and Japan, the European market has faced some some shutdowns at a few regional crackers along with an unplanned outage at Borealis’ Sweden cracker. The company declared a force majeure on output from its Stenungsund cracker with 625,000 tons/year of ethylene production capacity in early May.

To track the most updated ethylene production news, please see PE Production News.

In addition to supply issues, there have been some other supportive factors for the rally in spot ethylene prices.

Strong naphtha prices in Asia, Europe

According to ChemOrbis data, spot naphtha prices on CFR Japan and CIF NWE basis closed the week that ended on May 22 at their highest levels since early March, triggered by strong crude oil futures.

Robust China demand adds to firming in Asia

Market players have been reporting that ethylene demand from China has been robust since the end of the long Labor Day holiday on the back of high operation rates in the downstream styrene, ethylene oxide, and PVC plants.

June C2 contracts expected to reverse course after 3 months

In Europe, ethylene contracts for March, April and May were all settled with monthly decreases of €50/ton, €200/ton and €100/ton, respectively. However, market expectations for June are mostly calling for an increase.

Considering firmer energy costs and spot monomer prices throughout May, monthly hikes of up to €50/ton are expected in the next monomer outcome.
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