Northeast and Southeast Asian olefin prices enjoyed a technical rebound due to increased short-covering by traders fulfilling term contracts for the first half of July. In Southeast Asia, the restart of Lotte Chemical Titan’s No 2 cracker and its associated derivative units led to renewed demand for propylene cargoes for July.
In China, growing supply of both olefins exerted additional downward pressure on spot prices earlier. However, traders have purchased some cargoes to East and South China at higher levels for early July delivery, lifting spot prices this week. For ethylene, the cracker outages and plant malfunctions in the US Gulf which were caused by Hurricane Beryl, and a partial maintenance turnaround at US Enterprise, have led to higher US Gulf spot prices, and the closure of the US Gulf coast to Asia ethylene arbitrage.
Northeast Asia propylene and ethylene prices ticked up for now
Traders were heard to have bought spot ethylene parcels at $860/ton CFR East China for early July delivery to term buyers. For propylene, traders purchased cargoes at the higher $870-880/ton to East and South China for first-half July delivery.
Whilst this has aided to boost sentiment, there remains concern that higher PDH plant operating rates in China, as well as the return of various plants from their turnarounds, have exacerbated pressure on domestic supply. China’s PDH operating rates climbed to the highest in June, rising to nearly 74% due to several PDH plants returning from extended shutdowns, and operating rates are still at higher levels for July. Shandong Jinneng restarted the 900,000 tons/year PDH plant in mid-June and raised run rates. Hebei Haiwei also resumed operations at its 500,000 tons/year PDH unit in mid-June.
NEA/China spot ethylene prices also edged up as traders were heard to have re-entered the spot market, picking up several cargoes at $860/ton CFR East China to cover shortfalls for early July. Whilst sentiment has firmed, given the end of the USG-to-Asia/China arbitrage trade, which has been ongoing since March, there will still be ex-USG ethylene cargoes arriving in China between August and September. An estimated 100,000+ tons of ex-USG ethylene cargoes will arrive within mid-July, but traders report that some 90,000+ tons of ex-USG ethylene cargoes will still be heading to China between August and mid-September.
NEA spot ethylene prices edged up $10/ton from last week to be assessed at $860/ton CFR China, whilst propylene prices rose by the same amount and were assessed at $880/ton CFR China as of July 10.
SEA propylene climbs on resurgent demand
SEA spot propylene prices finally managed to recover from the low $810-830/ton CFR levels, which lasted from early May to late June. Traders reiterate often that there is little room for spot propylene prices to fall, given higher propane feedstock prices, which traded around $600/ton to $670/ton between May and June. With the current July price of $639/ton CFR Japan, plus a production cost of $250/ton, production margins are at break-even or negative.
The climb back to $850/ton CFR SEA for spot propylene this week has also been driven by the return of Indonesia’s Lotte Chemical Titan, a key buyer of spot propylene, as well as more short-covering by traders for first-half July.
SE Asian ethylene prices remained flat this week, although traders said there will continue to be further downward pressure, even with Chandra Asri, another key buyer of spot ethylene, likely to return from its cracker and derivative units’ turnaround in early July.
Spot ethylene prices were flat from last week to be assessed at $930/ton CFR Southeast Asia, while propylene prices climbed $30/ton from last week to be assessed at $850/ton with the same terms as of July 10.
Southeast Asian crackers restarting in July-August will pressure supply
Southeast Asia’s olefins supply will expand again with several crackers expected to resume operations in July/early August. With these major crackers resuming production, there are concerns there will be further downward pressure on ethylene and propylene prices.
Vietnam’s Long Son Petrochemical shut its 1 million tons/year ethylene cracker, located at Ba Ria-Vung Tau because of technical issues on February 21. The company also declared force majeure on its olefin products, and the cracker has remained in an extended turnaround. The cracker should have restarted in early July but has now been delayed to late July or early August, according to industry sources. Traders commented that this will certainly lengthen the region’s supply, especially when the other regional crackers will also be resuming production.
Lotte Chemical Titan shut the No 2 naphtha cracker located at Malaysia’s Pasir Gudang in late April. The cracker produces 525,000 tons/year of ethylene and 280,000 tons/year of propylene. The cracker restarted operations in mid-June.
Indonesia’s PT Chandra Asri shut the 900,000 tons/year ethylene cracker located in Cilegon, West Java in early May for a scheduled maintenance of around 45 days. Traders said the Cilegon naphtha cracker should be restarting in early July.
