Published On: Tue, Feb 14th, 2012

Global spot ethylene prices continue to firm up

Global spot ethylene prices continue to firm up

Global spot ethylene prices continue to firm up

Spot ethylene prices posted another week of solid increases across the globe last week.  Rising naphtha costs and the resultant loss in margins were cited as the main factor pushing prices higher, although some production issues in the US and rising derivative prices also contributed to the upward movement seen in ethylene prices as per the pricing service of ChemOrbis.  Spot naphtha prices in both Europe and Asia moved above the $1000/ton threshold this week for the first time since the summer of 2011.

In Asia, spot ethylene prices on a CFR Northeast Asia basis reached their highest levels since June of last year as sellers reported seeing improved buying interest.  Formosa increased the operating rates of its three crackers at Mailiao from 80% to 90% last week, citing firmer ethylene prices and improving derivative demand as the main reasons for their decision to raise rates.  Traders reported that they were able to conclude a greater number of deals towards the end of last week, adding that they are seeing some interest in Asian material from buyers in Europe and Latin America as Asian material can be sold at competitive prices in those regions.  Asian cracker operators complained that their margins remain unsatisfactory even after the most recent increases in spot prices and that they are therefore hesitant to give any discounts on their prices for now.

In the US, spot ethylene prices posted gains in excess of the $22/ton increase seen in the January ethylene contract as some unexpected production outages led to reduced availability within the country late last week.  Flint Hills Resources’ 616,000 steam cracker in Port Arthur, Texas was shut down unexpectedly late last week because of a loss of steam and the subsequent rupture of a cracking furnace.  The cracker is expected to be down for the next one to two weeks.  Spot ethylene prices moved higher following the shutdown as a number of US crackers were already undergoing scheduled turnarounds and the fresh outage resulted in reduced spot availability.

Spot ethylene prices also gained ground in Europe over the past week as cracker operators struggle to restore workable margins in the face of rising energy costs.  European petrochemical plants are also struggling with severe winter weather across much of the continent, which has caused some technical issues at some plants while also disrupting transportation.  Total shut down two crackers in Belgium with a combined ethylene capacity of over 1 million tons/year at the start of this month after experiencing some undisclosed technical issues.