Asian ethylene extends gains as soaring oil and naphtha keep market supported

Asian ethylene prices continued to move higher across both Northeast Asia and Southeast Asia this week, building on last week’s strong rally. While spot trading activity remained relatively slow, market sentiment stayed firm as the sharp rise in crude oil and naphtha prices significantly increased production costs, making producers reluctant to commit to fixed-price cargoes.

Asian naphtha climbed to $968/ton CFR Japan, up from $833/ton a week earlier, representing a 17% weekly increase and standing 56% above the pre-war low of $620/ton recorded on February 27. At the same time, September Brent crude futures settled at $94.07/bbl, with participants continuing to monitor the volatile energy market. Ethylene forward prices also remained in contango, reinforcing expectations of higher future values.

As feedstock costs have risen much faster than ethylene prices, many traders preferred to delay fixed-price negotiations and reassess market values against rapidly changing naphtha costs. Producers are also becoming increasingly cautious over feedstock availability, as the continued closure of the Strait of Hormuz has created uncertainty over regional supply.

According to market sources, several tankers have either changed course or remained idle near the Red Sea due to growing concerns over the safety of shipping routes, adding further uncertainty to the supply chain.

The $50/ton premium of CFR Northeast Asia over CFR Southeast Asia remained unchanged this week, with both markets recording identical weekly gains.

Ethylene Price Update

CFR China
Current Price: $960/ton
Weekly Change: ▲ $10/ton
Bid Range: $930-950/ton
Offer Range: $1,030-1,100/ton

CFR Southeast Asia
Current Price: $910/ton
Weekly Change: ▲ $10/ton
Bid Range: $880-900/ton
Offer Range: $1,000-1,050/ton

In Northeast Asia, prices extended last week's sharp increase with another $10/ton gain as buying interest remained healthy. However, most negotiations shifted toward floating-price formulas instead of fixed-price deals due to continued volatility in crude oil and naphtha markets.

Discussions for August cargoes were heard at premiums in the low $30s/ton above CFR Northeast Asia assessments for deliveries into China. Some FOB South Korea cargoes were offered at discounts of $10-20/ton against CFR Northeast Asia prices, while a major Chinese buyer reportedly secured two US-origin cargoes for late August delivery using floating-price agreements.

Spot bids on Wednesday reached $940-950/ton CFR China/South Korea, while most sellers continued to offer material on formula pricing, with flat-price indications generally exceeding $1,050/ton.

Within China, Sinopec increased its domestic ethylene list price by CNY100/ton to CNY7,600/ton, while truck-based spot prices in East China climbed CNY200-300/ton, reaching CNY7,700-8,000/ton.

Taiwan continues to experience tight supply as Formosa Petrochemical and CPC maintain reduced cracker operating rates. Formosa's 700,000 tons/year No.1 Mailiao cracker has remained shut since October 2025 with no confirmed restart schedule. Its 1.2 million tons/year No.3 cracker is planned for maintenance in August, while the 1.03 million tons/year No.2 Mailiao cracker is currently operating at around 70% capacity. CPC has also lowered operating rates at both its 720,000 tons/year and 385,000 tons/year Linyuan crackers.

South Korean producers have also reduced cracker operating rates following the recent jump in naphtha prices, with several companies cutting production to limit widening losses.

South Korea Plant Updates

Lotte Chemical – Daesan
Capacity: 1.1 million tons/year
Run Rate: 65-70%
Status: Cracker to be spun off and eventually closed under merger with HD Hyundai Chemical.

Hanwha Total – Daesan
Capacity: 1.39 million tons/year
Run Rate: 80% (June)

GS Caltex – Yeosu
Capacity: 900,000 tons/year
Run Rate: 65%
Status: Reduced due to feedstock concerns.

HD Hyundai Chemical – Daesan
Capacity: 900,000 tons/year
Run Rate: 65-70%
Status: Operating at reduced rates because of feedstock uncertainty.

YNCC No.3 – Yeosu
Capacity: 500,000 tons/year
Status: Permanent shutdown scheduled for August 2026.

KPIC – Onsan
Capacity: 800,000 tons/year
Run Rate: 65%
Status: Lower operating rates amid high feedstock costs.

Southeast Asia also recorded a $10/ton increase, tracking gains in Northeast Asia. Although traders continued searching for August cargoes, most avoided firm bids and instead preferred floating-price discussions due to extreme volatility in energy markets. Buyers focused mainly on term contracts, expecting prices to remain firm in the coming weeks.

Market participants noted that naphtha prices have already moved above current ethylene spot prices, making fixed-price sales commercially unattractive. Producers therefore continued favouring cost-plus and formula-based pricing models instead of locking in flat-price deals.

Indicative offers in Southeast Asia were generally heard at $1,000-1,050/ton CFR, while bids remained around $900/ton CFR or lower.

Traders estimate that with naphtha at $968/ton CFR Japan and production costs around $250/ton, ethylene prices would need to reach approximately $1,218/ton CFR simply to achieve breakeven margins for a typical Asian naphtha cracker. As negative margins continue to widen, additional operating rate reductions among regional producers remain possible.

On the supply side, availability has improved slightly following the restart of PRefChem's 1.29 million tons/year Pengerang cracker and Petronas' 600,000 tons/year No.2 Kertih cracker. However, Thailand's Rayong Olefins continues to keep its 900,000 tons/year Map Ta Phut cracker offline, while Singapore's Aster Chemicals & Energy is still operating its 1.15 million tons/year Pulau Bukom cracker at only 50-60% capacity.

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