Asia’s Ethylene Prices covered a wider range in the 3rd Week of April

Ethylene Industry Outlook

In the global petrochemicals industry, Ethylene holds a prestigious position because of encompassing a huge market share both by value and volume. However, in terms of demand, the chemical is highly susceptible to upstream Naphtha and several downstream industries such as thermoplastic derivatives, PET, LDPE, HDPE etc. The year 2020 began with huge market optimism as U.S. and China trade war ended along with scheduled new plant capacities and planned crude oil to chemical (COTC) investments by Asian refiners.  However, the spread of coronavirus made the chemical industry slip into doldrums with olefins market becoming highly susceptible to crude crash and demand destruction as countries found no other means but to impose lockdown to contain the spread.

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Factors putting the ethylene market under pressure

Demand shock is exacerbating the ethylene price to fall to several years low. Reduced offtake from several downstream sectors of ethylene like polyethylene, MEG and styrene monomer has pressurized the Ethylene prices.

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Lockdowns in several APAC countries as the virus takes a toll throughout the world has forced factories to shut and succumb to logistics constraints and labour shortages. This forced the producers to lower their margins and sell the commodity at cheaper rates. Several downstream producers have also reduced their plant operations by 60-90 per cent.

Asia’s Cracker margins have also taken a hit and are expected to turn negative again after strong gains reported since early January which had remained negative for a longer time since October 2019. Many crackers in northeast and southeast Asia have trimmed rates by 10-15 per cent and were mulling raising rates again from February. Naphtha prices hovered around $184/MT to $200/MT CFR Japan in the last week of April. Cracker operating rates remained at 90 per cent in line with plans to minimize inventory and at higher levels on an average in northeast Asia. Ethylene supplies were further lengthened due to low naphtha prices and the recent increase in co-product propylene prices.

Producers are grappling with high inventories amid tepid demand for ethylene in northeast Asia. Extra cargoes remained idle in the market with no further shipments leading to weaker margins.

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Created on Apr 21st 2020 11:35. Viewed 325 times.

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