Strong buying interest from SEA lends support to NEA's monomer markets

In Northeast Asia, spot ethylene and propylene prices have rallied upwards recently as buyers from Southeast Asia have begun bidding against Northeast Asian buyers after supplies from some of Southeast Asia's most regular suppliers were restricted by some plant issues.  This rally in monomer prices has pushed spot ethylene and propylene prices to levels last seen in early September, while also acting to mitigate the effect of unspectacular demand and upcoming supply overhangs in Northeast Asia's spot PP and PE markets.

In the spot ethylene market, prices on a CFR NEA basis have gained $40/ton over the past week and slightly less than $100/ton since late October in a rally that began on the last trading day of October, with spot prices reaching $960-970/ton CFR NE Asia this Monday.  As demand for PE products in Northeast Asia has not been strong enough to justify the increasing ethylene prices, players have attributed the rise in prices to new demand from Southeast Asian buyers, who have been forced to search out new suppliers after some plant issues forced Iran's Marun Petrochemical to shut down its 1.1 million tons/year cracker, which is a major source of spot ethylene in Southeast Asia.  Middle Eastern availability has been further restricted by the fact that Saudi Arabia's Yansab has elected to delay a turnaround at its 770,000 tons/year MEG plant, thereby reducing the availability of spot ethylene for export from Saudi Arabia. The lack of Middle Eastern supplies has led players in Southeast Asia to turn to sources that normally supply the Northeast Asian market, with a large spot cargo reportedly being sold from Taiwan late last week to a buyer in Southeast Asia.  In addition, better than expected sentiment in the Asian PVC market has lead to expectations that ethylene availability for export from Taiwan will be reduced in the weeks ahead while the impending start-up of Tianjin Dagu's new 500,000 tons/year styrene plant is expected to limit spot ethylene availability inside China.

In the propylene market, a similar dynamic has been at work, pushing prices $15-20/ton higher over the past week to around $1020/ton FOB Korea.  Sellers in Korea were reported to be withholding their spot propylene offers late last week due to an expectation that tight supplies in Southeast Asia would lead buyers in the region to seek out alternative supplies as a lack of deep-sea propylene origins and low cracker operating rates in the region had been driving propylene prices higher in Southeast Asia.  In addition, healthy margins for producers of propylene oxide helped buoy demand for propylene in Northeast Asia in spite of the fact that PP producers are struggling with tight or even negative margins as demand for PP remains lackluster in Northeast Asia.  However, a few propylene buyers in China remain hopeful that the current rally will not be able to maintain itself much longer in the face of weak demand for its main derivative PP as well as the prospect of increasing propylene suppliers now that refineries are expected to increase gasoline production following the recent price increase on gasoline observed in China.