Stronger styrene monomer could elevate Asian ethylene market

The Asian ethylene market has been steadily going down since early May as bloated supply and weak demand weighted down on the sentiment. Compared to the peak during the first week of May, ethylene based on CFR Northeast Asia has fallen $270/ton to reach $940/ton on last Friday. Meanwhile, Southeast Asia value dropped about $200/ton for the same period. Players are anticipating the bottom to be reached soon.

It is reported that surging styrene monomers (SM) costs earlier this year played a crucial role in lifting ethylene market to its multi months high levels from mid-April to mid-May. However, as SM fell on strong market resistance, ethylene extended the weakening trend for over a month now. SM market has improved visibly in recent weeks as Chinese buyers return to make replenishment, and this could prevent ethylene from further deterioration.

“At the meantime, Fareast Asian crackers have completed annual turnaround and in the process of normalizing production rate, we think supply might remains lengthy for the next couple of week. Especially when the main ethylene derivative market - PE sees little improvement in term of demand,” an industry participant commented.

Experts also expected the GCC conflict might force Qatar to source ethylene from other suppliers instead of from neighboring Middle Eastern countries. However, it is still unclear on this matter at the moment. If this was to take place, it could alter the situation at the ethylene market as well.