SINGAPORE--Asian ethylene spot prices could break the psychological $1,000/tonne (cost and freight) CFR northeast (NE) Asia level not seen since June 2007 on the back of worsening demand conditions, traders and buyers said on Monday.
The prospects of a market rebound after the National Day holidays in China appeared dim, as end-users in key ethylene derivative sectors ranging from polyethylene (PE) to polyvinyl chloride (PVC) and vinyl acetate monomer (VAM) were reducing production due to poor demand.
Manufacturing and exports in Asia are expected to be hit by a global economic slump, which could depress demand for raw material purchases, including petrochemical products, market sources said.
Everybody is expecting further downward momentum after the Chinese holidays, said a Korean trader. It s hard to find interested buyers.
Ethylene spot prices fell to a fresh 15-month low of $1,000-1,050/tonne CFR NE Asia last week, according to global chemical market intelligence service, ICIS pricing. The slide had been rapid, with ethylene prices losing $650-670/tonne in a matter of three months, after peaking above $1,700/tonne CFR NE Asia in early July.
Traders said the spread between ethylene and PE, which currently stands at attractive levels close to $400/tonne, was expected to narrow further as PE prices were seen heading south due to ample stocks and poor demand. Spot prices of commodity film grade high density PE were unchanged at $1,380-1,450/tonne CFR China last week.
The gloomy outlook had reduced liquidity in the ethylene spot market as traders could not find buyers and were thus reluctant to take positions.
We have no confidence to buy, said an ethylene trader based in Singapore, adding that there s no tank space.
In contrast, spot supply especially from the Middle East remained ample, with potential buyers in Asia receiving calls asking if they could still take in October loading cargoes. No tenders from Iran had surfaced for October shipments but buyers and traders said talks were ongoing privately.
Nonetheless, there was limited appetite for spot ethylene as downstream cutbacks meant that contractual cargoes were sufficient to fulfill buyers needs whatever the price, olefin traders said.
In Taiwan, the rapid fall in spot prices had caused discord in contractual negotiations, with some buyers locked in talks with state-run cracker operator Chinese Petroleum Corp (CPC) to settle September ethylene prices. They had proposed a formula of naphtha prices plus an additional $350/tonne. The producer had set the provisional contract price at above $1,500/tonne.
We think it s reasonable to ask for naphtha plus $350/tonne. This works out to be close to $1,100/tonne, which is still more expensive than imports that we can get at $1,000/tonne, one Taiwanese end-user said in Mandarin.
Open-spec naphtha spot prices were traded down $87/tonne at $727-728/tonne CFR Japan last week for November contracts, according to data from ICIS pricing.
The weak market conditions this year had proven to be extremely challenging for naphtha-based cracker operators, which are being squeezed by volatile feedstock prices and poor demand. More production cutbacks were on the cards.
South Korea s Honam Petrochemical and its wholly owned subsidiary Lotte Daesan have said that they are seriously considering rate cuts, following in the footsteps of regional peers such as Taiwan s Formosa Petrochemical Corp and Yeochun Naphtha Cracking Center (YNCC) , which have already announced output reductions.
The prospects of a market rebound after the National Day holidays in China appeared dim, as end-users in key ethylene derivative sectors ranging from polyethylene (PE) to polyvinyl chloride (PVC) and vinyl acetate monomer (VAM) were reducing production due to poor demand.
Manufacturing and exports in Asia are expected to be hit by a global economic slump, which could depress demand for raw material purchases, including petrochemical products, market sources said.
Everybody is expecting further downward momentum after the Chinese holidays, said a Korean trader. It s hard to find interested buyers.
Ethylene spot prices fell to a fresh 15-month low of $1,000-1,050/tonne CFR NE Asia last week, according to global chemical market intelligence service, ICIS pricing. The slide had been rapid, with ethylene prices losing $650-670/tonne in a matter of three months, after peaking above $1,700/tonne CFR NE Asia in early July.
Traders said the spread between ethylene and PE, which currently stands at attractive levels close to $400/tonne, was expected to narrow further as PE prices were seen heading south due to ample stocks and poor demand. Spot prices of commodity film grade high density PE were unchanged at $1,380-1,450/tonne CFR China last week.
The gloomy outlook had reduced liquidity in the ethylene spot market as traders could not find buyers and were thus reluctant to take positions.
We have no confidence to buy, said an ethylene trader based in Singapore, adding that there s no tank space.
In contrast, spot supply especially from the Middle East remained ample, with potential buyers in Asia receiving calls asking if they could still take in October loading cargoes. No tenders from Iran had surfaced for October shipments but buyers and traders said talks were ongoing privately.
Nonetheless, there was limited appetite for spot ethylene as downstream cutbacks meant that contractual cargoes were sufficient to fulfill buyers needs whatever the price, olefin traders said.
In Taiwan, the rapid fall in spot prices had caused discord in contractual negotiations, with some buyers locked in talks with state-run cracker operator Chinese Petroleum Corp (CPC) to settle September ethylene prices. They had proposed a formula of naphtha prices plus an additional $350/tonne. The producer had set the provisional contract price at above $1,500/tonne.
We think it s reasonable to ask for naphtha plus $350/tonne. This works out to be close to $1,100/tonne, which is still more expensive than imports that we can get at $1,000/tonne, one Taiwanese end-user said in Mandarin.
Open-spec naphtha spot prices were traded down $87/tonne at $727-728/tonne CFR Japan last week for November contracts, according to data from ICIS pricing.
The weak market conditions this year had proven to be extremely challenging for naphtha-based cracker operators, which are being squeezed by volatile feedstock prices and poor demand. More production cutbacks were on the cards.
South Korea s Honam Petrochemical and its wholly owned subsidiary Lotte Daesan have said that they are seriously considering rate cuts, following in the footsteps of regional peers such as Taiwan s Formosa Petrochemical Corp and Yeochun Naphtha Cracking Center (YNCC) , which have already announced output reductions.
