Singapore January 26 2022: Selling sentiment in the Asian ethylene market improved Jan. 25 on the back of higher discussion levels, as several operating rate cuts due to higher naphtha prices in the region have led to supply tightness.
“There were too many operating rate cuts starting December 2021, which has resulted in a tighter supply pool. It is natural for sellers to look higher as buying interest for late-February and March arrivals have increased,” said a trader based in Northeast Asia.
Some participants said ethylene prices might have bottomed out, given the overall tight supply in Asia.
A recent price increase in the Chinese domestic market supported sentiment as well, with some sources saying buyers needed to replenish inventory levels as buying was limited in December amid weakness in derivative markets.
Despite the improving sentiment, steam cracker operators are closely watching the key CFR Northeast Asia ethylene to C+F Japan naphtha spread, which stood at $203.25/mt at the Jan. 25 Asian close, down 27.89% since Jan. 3, Platts data showed. The unprofitable ethylene-naphtha margin has been below the typical breakeven level of $350/mt since Dec. 23 at $313/mt, Platts data showed, and prompted steam cracker operators to reduce run rates.
At least one Asian naphtha-fed steam cracker reduced run rates in January, and another Asian steam cracker told Platts that he will make the move towards the end of the month, Platts reported earlier.
“We have no immediate plans to increase our cracker run rates,” said a producer based in Northeast Asia. “We are still losing money on ethylene production and it will be difficult to do so, given how high naphtha prices are at the moment.”
