Asia: Ethylene costs plunged to six months low, market concerns about further fall

In Asia, ethylene costs based on CFR Northeast Asia term shredded $90/ton just within this week to touch the lowest levels reported since early December 2016. The rapid price deterioration is caused by the lack of support from downstream market despite tight availability amid the maintenance shutdown season.

In fact, most ethylene derivatives including PE, MEG, VCM and styrene monomer were making losses until this week, when styrene rebounded. However, the come back of styrene monomer alone does not provide sufficient support to ethylene market as the largest ethylene derivative – PE is still weak. On an average, import HDPE film to China this week stand at approximate $1118/ton CFR China, LC AS term, which is below the weekly average price for ethylene at $1130/ton, not to mention the conversion costs.

Asian players therefore are expecting further reduction in ethylene prices in the near term. “We have heard of some lower prices for ethylene recently and with weak downstream market, room for further reduction is there. Just that, the extent of reduction might be limited,” a market source said.