Ethylene costs retreated from multi-month highs, outlook remains uncertain

Ethylene costs in Asia has been steadily firming up since early December 2017 on the back of tightened supply and strong buying interest in China, and recently hit above the $1400/ton mark, reaching $1420/ton CFR Northeast Asia – the highest level since 15 June 2015. However, market soon loses steam as record high prices attract more supply from integrated operators in the region, causing a slip in prices during mid January 2018.

In fact, ethylene costs based on CFR Northeast Asia term fell $40/ton on 12 January before holding steady throughout this week due to increased availability from Southeast Asian suppliers. Industry sources reported to have seen active spot ethylene offers from Malaysian, Singaporean and Thailand producers in recent days, which fill up the supply gap from Middle Eastern suppliers.

The question players are asking at the moment is that would ethylene costs continue to fall in the near term? There are diverged opinions on this issue.

From one perspective, industry participants are seeing a stabilising demand condition in Northeast Asia region as buyers have completed pre-Lunar New Year restocking. Meanwhile, the increasingly available of Southeast Asian ethylene cargoes might ease the current tightness and prevent any significant hike. 

On the other hand, market is about to enter heavy maintenance shutdown season that might cause an estimated production loss of more than 460,000 tons of ethylene in quarter 1 alone. “And therefore, the current dullness is not going to sustain. Buying interest would soon to revive,” a market source commented.

Following table detailed the shutdown schedules at major crackers in the first quarter 2018.