Asian Ethylene Prices Continue Rising as Crude Surge and Tight Supply Support Market

Ethylene prices across China and Southeast Asia moved higher again this week, supported by the continued rise in crude oil and naphtha values. With the US-Iran conflict showing no signs of ending, producers are increasingly factoring in the risk of prolonged supply disruptions. Oil prices surged on Tuesday as tensions and rhetoric between the US and Iran intensified, making the prospect of a near-term peace agreement more distant. October Brent futures settled at $91.62/bbl on Wednesday.

The sharp increase in feedstock costs and continued uncertainty surrounding the conflict have also led major suppliers to withdraw firm spot offers. As a result, the gap between buyer bids and seller indications has widened, with buyers increasingly outnumbering available sellers.

CFR China
Latest Price: $1,020/ton
Weekly Change: ▲ $20/ton
Bid Range: $980-990/ton
Offer Range: $1,130-1,150/ton

CFR Southeast Asia
Latest Price: $1,000/ton
Weekly Change: ▲ $40/ton
Bid Range: $960-980/ton
Offer Range: $1,100-1,130/ton

Northeast Asian Prices Extend Gains on Stronger Buying Interest

Ethylene prices in Northeast Asia and China continued last week's upward movement as Chinese traders increased their spot buying interest. Sentiment remained firm amid higher October Brent futures and rising Asian naphtha values. Chinese traders sought spot ethylene and propylene cargoes for delivery from late August to early September to meet requirements from key contract buyers. However, end users remained mainly focused on term negotiations and preferred floating-price contracts because of continued volatility in crude oil and naphtha futures.

With October Brent futures moving above $91/bbl, Asian naphtha prices edged up to $811/ton CFR Japan, compared with $809/ton CFR Japan last Tuesday.

Spot ethylene prices rose by $20/ton from the previous week, while tighter spot availability and higher naphtha costs continued to support the market. In China, Sinopec kept its ethylene list price unchanged at CNY 8,000/ton. Spot prices in East China and Shandong increased by CNY 50-100/ton to CNY 7,950-8,100/ton.

Limited seller participation made it difficult to establish firm fixed-price levels. Sellers that had already concluded floating-price transactions were seeking premiums of $35-40/ton over CFR Northeast Asia assessments for September arrivals. Once these prices are settled, their flat-price equivalent is expected to be above current CFR China levels.

Several market participants still needed to cover supply shortfalls for late August and early September, with some transactions completed on a floating-price formula basis. Two Chinese traders were reported to have purchased spot cargoes on a CFR China basis at premiums of $30-35/ton over CFR Northeast Asia assessments for first-half September arrival. Another South Korean cargo was reportedly concluded on an FOB South Korea basis at a $15/ton discount to CFR Northeast Asia assessments for September loading.

Chinese trader bids moved into the high $900s to $1,000/ton CFR China/Northeast Asia, while seller indications climbed above $1,100/ton, creating a gap of around $130-150/ton and limiting fixed-price deals. Some Chinese traders also purchased domestic cargoes to meet late-August requirements.

Regional olefin supply is expected to tighten further, especially in South Korea, where several maintenance shutdowns are scheduled for September and October. Lotte Daesan plans to shut its 1.1 million tons/year cracker in mid-October for maintenance, while KPIC is also scheduled to take its 800,000 tons/year cracker offline in October.

Cracker operating rates across China, Japan, and Taiwan have remained low because of feedstock availability and margin concerns. The ongoing US-Iran conflict has added further uncertainty regarding naphtha supplies moving through the Strait of Hormuz.

In Taiwan, supply remains tight as state-owned CPC and Formosa Petrochemical have maintained reduced cracker operating rates since the beginning of the year. CPC reduced operating rates at its 720,000 tons/year and 385,000 tons/year Linyuan crackers to 70%, compared with 80% in July. Formosa Petrochemical is scheduled to shut its 1.2 million tons/year No. 3 naphtha cracker for maintenance in August, while its 1.03 million tons/year No. 2 Mailiao cracker is currently operating at 70%.

Southeast Asian Prices Record Larger Gains as Spot Offers Become Scarce

Southeast Asian spot ethylene prices also continued their upward trend as more buyers competed for very limited fixed-price offers, while floating-price offers became increasingly scarce. Spot prices in the region rose by $40/ton, or 4%, this week.

Escalating US-Iran tensions and higher crude and naphtha prices have increased producer concerns about feedstock and supply availability. Traders in Southeast Asia remained active in seeking both fixed- and floating-price cargoes, while end users continued to focus mainly on term contract negotiations.

Suppliers and potential sellers from Southeast Asia, South Korea, and China have held back offers as concerns over supply security increased. Negotiations are continuing, but the widening difference between buyer and seller expectations has made pricing increasingly difficult, including under formula-based arrangements.

Producers are seeking premiums of $30-40/ton over CFR Southeast Asia assessments, while transactions concluded in China were reported at premiums of $30-35/ton over CFR Northeast Asia assessments. Notional seller indications stood above $1,100/ton CFR Southeast Asia, compared with bids of around $990-1,000/ton. Floating-price bids for early September delivery were reported at premiums of $15-25/ton.

Supply in Southeast Asia is expected to remain tight during August. Malaysia's PRefChem restarted its 70,000 bbl/day RFCC units only in late July after technical issues caused their shutdown earlier in the month. Its 1.29 million tons/year Pengerang cracker, which restarted in mid-June, continues to operate at around 60-70%.

Rayong Olefins shut its 900,000 tons/year Map Ta Phut cracker in early March, with traders indicating a tentative restart in September. Aster Chemicals & Energy, which had been operating its 1.15 million tons/year Pulau Bukom cracker at 50-60%, shut the unit in August for one month of planned maintenance.

PT Lotte Chemical Indonesia reduced operating rates at its 1 million tons/year Cilegon cracker to 50-55%, down from an earlier 65%, due to feedstock concerns. ExxonMobil has kept its older 900,000 tons/year Jurong cracker shut since March.

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