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Asian ethylene/naphtha spread at widest in 4 years despite deepsea supply

The Asian ethylene/naphtha spread widened $16.50/mt day on day to $683.38/mt Thursday, September 18, driven by bullish ethylene despite an expected influx of deepsea European ethylene supply, Platts data showed.

The spread was last wider February 2, 2010, at $691.38/mt.

The CFR Northeast Asia ethylene benchmark rose $10/mt from Wednesday to be assessed at $1,550/mt Thursday, while the CFR Japan naphtha price dropped $6.50/mt to $866.63/mt during the same period.

Trading sources said about 20,000 mt of ethylene has been fixed to load from Europe in late September and early October and head for Asia.

Since the arbitrage window remained open from Europe, some trading sources said they expect more cargoes to be fixed from the West. Asia’s spot ethylene demand is currently high due to a regional shortfall amid the annual maintenance season.

In South Korea, LG Chem plans to shut its 1 million mt/year naphtha-fed steam cracker in Yeochun for one month of annual maintenance from October 22, and Yeochun Naphtha Cracking Center plans to shut its 470,000 mt/year No. 3 naphtha-fed steam cracker at Yeosu on September 22 for around a month of annual maintenance.

Despite expected deepsea supply, the CFR NEA ethylene price remained bullish due to high freight costs.

Trading sources said high freight rates and limited vessels availability in Europe kept deepsea offer levels relatively high.

Sources estimated typical freight from Europe to Asia at $400-450/mt. Considering the FD Northwest Europe ethylene price of $1,174.63/mt Thursday, deepsea sellers would need to sell their Europe-origin ethylene cargoes at least around $1,580/mt CFR Asia to generate profit.

“Because lots of spot ethylene cargoes have been fixed from Europe to Asia, vessels availability in the West is very limited,” said a trading source.

Some trading sources said they do not expect the ethylene/naphtha spread to widen further as steam cracker operations will likely normalize around November.

– Platts.com

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