Asian ethylene market falls again after a short-lived rebound
Dec. 04, 2018
In Asia, the rebound in spot ethylene prices that kicked off in early November lasted only two weeks. The market has resumed the downturn and cancelled a large portion of the previous gains.
Recovery unsustained from the lowest level of more than two years
According to ChemOrbis Price Wizard, prices has dropped more than $90/ton on a weekly average basis since mid-November. In the short-lived recovery period, the market gained $120/ton on average in the two weeks before they steadily fell for 11 weeks in a row, nearing the $900/ton CFR Far East Asia threshold and hitting a more-than-two-year low.
What dragged prices down again?
Falling demand amid weak performance of downstream sectors and the volatility in crude oil prices were blamed for the renewed downturn. Higher supply levels and the approaching end of the maintenance season in the region also kept spot prices bearish.
Does it have only supply-demand to blame?
Demand for spot ethylene was weighed on by negative downstream margins, which reportedly led some producers to consider cutting operational rates at their plants. Besides the general sentiment that ethylene had been overvalued compared to downstream prices and naphtha, the bearish trend also found support from the import arrivals.
The downward spiral in spot prices also followed the volatility in crude oil futures, which continued to weaken amid rising stock levels and thinner demand.
Unexpected outages unlikely to boost sentiment
On the production side, Japanese producer JXTG Nippon Oil & Energy is shutting its 460,000 tons/year ethylene cracker for emergency repairs in early December.
However, market sources report that JXTG’s outage is unlikely to support demand as the turnaround season is coming to an end in the region. In South Korea, LG Chem has recently resumed production at its 1 million tons/year cracker after an annual maintenance that began in October.