Europe-Asia ethylene spread hits 6-year high as prices slide in Asia

Petrotahlil:The spread widened $9/mt day on day to $206/mt Thursday, the highest since September 3, 2013, when it was calculated at $207.50/mt, Platts data showed.

The CFR Northeast Asia marker dived $10/mt day on day to be assessed at $930/mt Thursday, while the CIF Northwest Europe marker edged down $1/mt to $1,136/mt.

Ethylene prices in Asia are under pressure due to a fall in downstream plant operations, notably for polyethylene and monoethylene glycol, that are resulting in a surplus of ethylene in the region.

Market sources said ethylene supply was particularly heavy in Southeast Asia due to a fall in linear low density PE plant operations, while excess spot supply was also seen in Taiwan.

Taiwan's Formosa, which sells ethylene only on an occasional basis when inventory is high, has sold 20,000 mt for June and July loading -- its first sales recorded to date in 2019.

In Thailand, PTT has issued a tender to sell a 3,500-5,000 mt spot ethylene cargo for end June loading, after earlier selling 3,500-5,000 mt via tender for mid-June loading. It typically sells only one cargo each month.

On the demand side, spot buying appetite in China for ethylene was limited due to the US-China trade dispute impacting exports of downstream finished plastics products, prompting traders in Asia to hunt for opportunities to move excess cargoes to Europe.

"Northeast Asia is seen to be well-supplied and supply is likely to increase after Hanwha Total restarts its steam cracker," a market source said. "In that case, where can excess supplies from Southeast Asia go?"

South Korea's Hanwha Total delayed the restart of its naphtha-fed steam cracker in Daesan by around a month to early June due to labor strike after it was shut March 27 for maintenance and debottlenecking that will increase its ethylene capacity to 1.4 million mt/year from 1 million mt/year.

Market sources in Asia said the arbitrage window from Asia to Europe was currently open on paper but logistical constraints were likely to hamper any sales. "It usually takes around two months to move Asia cargoes to Europe; by then ethylene demand in Europe will be gone after turnarounds are completed," one market source said.

Ethylene supply is expected to remain tight in Europe amid major turnarounds into June, but ease later in the month as crackers restart.

The FD Northwest Europe spot price has averaged Eur46.38/mt higher to date in May than in April at Eur1,008.26/mt.

Traders said buying interest in Europe was currently being covered by imports from the US, Middle East and Latin America, and most buyers were covered for the turnaround period.

In addition, ethylene terminals at NWE coastal ports were heard to have been full since April. "Storage seems to be quiet tight because I feel inventory pressure from customers," a trader in Europe said.

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