Traders are considering sending European ethylene cargoes to Asia for late May delivery amid weak European prices, sources said Thursday.
Market participants said they have been approached by several traders with selling indications around $1,450-1,460/mt CFR Northeast Asia and in the low $1,400s/mt CFR Southeast Asia.
European ethylene prices have fallen due to abundant supply and weaker European naphtha. They have sunk $44.25/mt since March 3 to $902.750/mt CIF Northwest Europe Wednesday.
The CIF Northwest Europe ethylene marker has fallen $42/mt over the same period to $1,218/mt.
Asian ethylene prices were more than $200/mt higher than the European market, at $1,460/mt CFR Northeast Asia and $1,440/mt CFR Southeast Asia Wednesday.
European ethylene was last offered to Asia in early February, when CIF Northwest Europe prices held steady at $1,217.50/mt for more than a week. That compared with Asian ethylene prices of $1,470/mt CFR Northeast Asia and $1,405/mt CFR Southeast Asia for the entire first week of February.
Sources said Southeast Asia might be a preferred destination for the European cargoes given a higher netback value.
“Northeast Asian price is just $20/mt above the Southeast Asia — there is an additional $30-40/mt freight if the cargo is heading to the north,” said trader in China. “Thus, it makes more sense to go Southeast Asia.”
However, sources said the delivery dates for such trades might be tricky, given the startup of the 1.5 million mt/year Borouge 3 ethane cracker in Ruwais, UAE, in April and regional crackers restarting from turnarounds in mid-April.
“Last time, the traders were offering Europe material for H2 March or H1 April arrival in Asia,” said a source in Northeast Asia. “It was not so difficult to sell as most market participants expected prices to be firm as regional supply was going to be tight with crackers in the region on turnarounds.”
This time, European cargoes are being offered for H2 May arrival, when supply tightness is expected to ease after regional crackers return from maintenance in mid-April.
Some Asian suppliers said they were concerned the European cargoes might cause a supply glut in May.
“Maintenance will be over by then, and if these cargoes really come to Asia, our margins will be squeezed,” said a producer in Northeast Asia.
Overall cracker margins are currently positive, supported by firm ethylene and propylene prices, producers said. They said they were taking losses on co-products such as butadiene and pygas.
Naphtha was assessed at $923.50/mt CFR Asia Wednesday, and crack margins were estimated at $87.10/mt for ethylene and $151.50/mt for propylene.
Source: Platts.com
