Asian ethylene market slumped on ample supply and weak demand

The Asian ethylene market plunged three digits in value in a span of one week, shredding $100-130/ton compared to 27 May 2019, data from CommoPlast showed. Ample spot supply and weak demand from the most downstream market is blamed for the downswing, sources said. 

At the time this report is published, ethylene costs based on CFR Northeast Asia has reached $890/ton while CFR Southeast Asia fell to $800/ton, though market players are still expecting further reduction in the near term.

Looking at the downstream PE market, import PE film prices to China have constantly following the downtrend since the beginning of May due to piling pressure from falling local market. The full report is here.

Apparently, demand from the packaging sector is hit badly as the trade war between China and the USA escalate. According to several suppliers, many PE packaging converters are forced to lower operation rate amid lacking end product orders.

Meanwhile, spot supply for ethylene continues to pour in as PE producers reduce run rate leading to excess supply. It is reported that Taiwan’s Formosa has opened sell tender for 10,000 tons of ethylene for second-half June/first half July loading. Thailand’s PTT also announced sell tender for 3,500-5,000 tons of ethylene for end of June loading. 

With the current naphtha price level, market players are not expecting ethylene-cracking operator to lower operation rate since profit margin remain healthy. This might lead to more spot ethylene available moving forward.