SINGAPORE--An unrelenting increase in raw material costs has seen ethylene (C2) rise between $20-30/tonne in northeast (NE) Asia, and $80-100/tonne in southeast (SE) Asia, pushing prices to a 16-year high but the market is divided whether further gains can be sustained, traders said on Monday.
The spike in naphtha late last week helped to drive ethylene spot prices up $20-30/tonne at $1,630-1,670/tonne CFR (cost and freight) NE Asia, while prices in SE Asia gained $80-100/tonne to $1,500-1,600/tonne CFR both at the highest traded levels since 1992, according to global chemical market intelligence service ICIS pricing.
Naphtha had hit a new record of above $1,200/tonne CFR Japan last week as crude vaulted to a fresh high of above $142/bbl.
"At the moment, it is a deadlock," said a Japan-based ethylene trader. "Nobody wants to sell below cost but buyers are threatening to cut production if prices increase further."
Surging feedstock naphtha and crude prices have forced cracker operators in the region especially those that are non-integrated to cut ethylene production and companies such as Indonesia s Chandra Asri and Petrochemical Corp of Singapore (PCS) plan to maintain rates at 75-85% in the near-term.
Production problems in Taiwan have also added to the tight supply situation, along with the cracker turnaround schedule in Japan.
Faced with increasing resistance from buyers in poorly performing derivative markets such as styrene monomer and mono ethylene glycol (MEG), ethylene traders were now very selective in pushing spot sales.
"We are focusing on sales to PE (polyethylene) and vinyls makers," said another Japanese trader.
PE spot prices in Asia are currently traded above $1,800/tonne CFR NE Asia, making it affordable for producers to purchase ethylene in the $1,600s/tonne as the break-even spread between the two chemicals is around $150/tonne.
Some traders, however, expected PE makers to rein in their ethylene purchases as demand from converters had dipped and buyers were increasingly staying clear of the spot market and purchasing on formula.
"PE prices are high but we are already seeing a slowdown in sales," said a SE Asia-based trader. "No one wants to talk about (ethylene) prices."
Converters were having a tough time passing down the increased PE resin costs to their customers and had instead cut production.
The restart of key crackers in NE Asia after a heavy turnaround schedule in the second quarter could provide some respite to the market, but some participants said prices remained well supported at current levels, as operators in the region had no incentive to raise production.
"Since the increase in costs cannot be absorbed by customers, which means offtakes would be smaller, cracker operators would have to cut rates," a trader said.
The spike in naphtha late last week helped to drive ethylene spot prices up $20-30/tonne at $1,630-1,670/tonne CFR (cost and freight) NE Asia, while prices in SE Asia gained $80-100/tonne to $1,500-1,600/tonne CFR both at the highest traded levels since 1992, according to global chemical market intelligence service ICIS pricing.
Naphtha had hit a new record of above $1,200/tonne CFR Japan last week as crude vaulted to a fresh high of above $142/bbl.
"At the moment, it is a deadlock," said a Japan-based ethylene trader. "Nobody wants to sell below cost but buyers are threatening to cut production if prices increase further."
Surging feedstock naphtha and crude prices have forced cracker operators in the region especially those that are non-integrated to cut ethylene production and companies such as Indonesia s Chandra Asri and Petrochemical Corp of Singapore (PCS) plan to maintain rates at 75-85% in the near-term.
Production problems in Taiwan have also added to the tight supply situation, along with the cracker turnaround schedule in Japan.
Faced with increasing resistance from buyers in poorly performing derivative markets such as styrene monomer and mono ethylene glycol (MEG), ethylene traders were now very selective in pushing spot sales.
"We are focusing on sales to PE (polyethylene) and vinyls makers," said another Japanese trader.
PE spot prices in Asia are currently traded above $1,800/tonne CFR NE Asia, making it affordable for producers to purchase ethylene in the $1,600s/tonne as the break-even spread between the two chemicals is around $150/tonne.
Some traders, however, expected PE makers to rein in their ethylene purchases as demand from converters had dipped and buyers were increasingly staying clear of the spot market and purchasing on formula.
"PE prices are high but we are already seeing a slowdown in sales," said a SE Asia-based trader. "No one wants to talk about (ethylene) prices."
Converters were having a tough time passing down the increased PE resin costs to their customers and had instead cut production.
The restart of key crackers in NE Asia after a heavy turnaround schedule in the second quarter could provide some respite to the market, but some participants said prices remained well supported at current levels, as operators in the region had no incentive to raise production.
"Since the increase in costs cannot be absorbed by customers, which means offtakes would be smaller, cracker operators would have to cut rates," a trader said.
