Asian Ethylene, Propylene Markets Change Direction

TIn Asia, spot prices for PP and PE have been tracking a rising trend over the past few weeks based on tight supply and high feedstock costs. Spot prices for propylene and ethylene had been rising over the same time owing to persistently limited supply as well as better than expected derivative demand. However, the spot markets for ethylene and propylene have recently changed direction in Asia, with prices moving downwards again owing to an influx of supplies from outside the region as well as softening downstream demand.

In the propylene market, a sustained upward trend that had pushed prices upwards by a total of approximately $260/ton since the beginning of March changed course in the middle of last week, with spot prices shedding about $40/ton since the middle of last week. Players attributed this shift in the market direction to an influx of deepsea cargoes from Europe, Africa and the US, with some sources estimating the amount of deepsea material heading for Asia at 35,000 tons or more. Depressed demand conditions in their own local markets has made an increasing number of sellers in Europe and the US look to Asia as a means of alleviating their supply overhangs, helping to boost the availability of deepsea materials for Asian buyers. Although there a number of additional shutdowns scheduled to occur within Asia over the next few weeks, sources were unclear as to whether or not the resulting diminution of supply would be enough to push prices in an upward direction once again. Slackening buying interest for downstream PP in the Chinese market is another factor weighing down on propylene prices, as converters are showing increasingly stiff resistance to higher prices following the significant price hikes seen over the past several weeks.

In the ethylene market, spot prices are also beginning to move downwards once again following an uptrend that saw prices gain nearly $140/ton between mid-March and the first week of April. Since the recent upswing reached its peak in the middle of last week, prices have fallen back down by around $30/ton, with most players citing softening downstream demand as the main reason for the shift in the market direction. Sentiment in China’s PE market has recently shifted, with buyers retreating to the sidelines once again following several consecutive weeks of rising PE prices. Many players in the PE market expressed concern that prices might see a major downward move over the medium term now that PetroRabigh’s new plant in Saudi Arabia has begun operations, signaling that the current tight supply situation may come to an end soon. Also weighing down on the price of ethylene is sluggish demand for MEG and poor consumption from the vinyls sector, two other key downstream markets for ethylene.

Source: ChemOrbis.com