Asian ethylene costs reach nine-months low

In Asia, ethylene prices based on CFR Southeast Asia continue to journey south on Friday, shredding $30/ton to reach the lowest levels in nine months. This is due to rising regional supply, stemming from the restart of most steam crackers that were shut in Q3 for maintenance work. Besides, Shell Singapore has also lifted force majeure at its 960,000 tons/year cracker last week after a month long offline for repairing at its compressor.

It is interesting that ethylene market turns bearish amid healthy condition at most of the derivatives sectors including PVC, PE and styrene monomers. At the current ethylene prices, margins most of these derivatives are positive, including HDPE film, which has been traded below theoretical costs for an extended period of time.

The most frequently asked question is whether ethylene prices would continue to decline in the near term? Industry participants are divided on their expectation with one side seeing further reduction, in small scale, given improving supply condition during year end, when most buyers have already stock up sufficiently.

On the other hand, an international trader said, “The styrene monomers might remain bullish for the remaining of the year due to tight supply condition, while PE and PVC also enter the traditional high demand season. We think this might be the key in holding ethylene costs from further weakening.”

Now that downstream markets have shrugged off the fact ethylene prices are at nine-months low to buoyed and players are tracking the line of derivatives would spread support for the upstream costs. On the other hand, few have discussed the possible effect of dropping ethylene costs on the general downstream sentiment. Further update on this issue will be available soon.