Home > Chemical News

Chemical News

Asian HDPE-ethylene spread turns negative on weak PE, stable ethylene

https://www.chemnet.com   Sep 28,2014 Platts
The Asian price spread between high density polyethylene and ethylene feedstock turned negative Thursday, September 25, falling to minus $5/mt from parity a day before, due to the bearish PE market amid continued firm ethylene, Platts data showed.

The CFR China film-grade HDPE price fell $5/mt from Wednesday to be assessed at $1,550/mt Thursday, while CFR Northeast Asia ethylene was assessed flat at $1,555/mt during the same period. It was the first time in eight months that the spread has been negative.

The spread was calculated at minus $10/mt on January 21. Typically, PE producers need $150/mt to break even.

The Asian HDPE and ethylene spread started to narrow in mid-June -- when it was calculated at $165/mt -- as tight ethylene supply rapidly pushed up the Asian ethylene market.

Market sources said a series of steam cracker shutdowns in Asia triggered ethylene supply tightness, which has been keeping ethylene price high.

According to Platts data, the spread between Asian ethylene and naphtha feedstock rose $3.88/mt day on day to $705.13/mt Wednesday, its highest level since February 1, 2007, when the spread was calculated at $731.25/mt.

An arbitrage window from Europe to Asia is currently open for spot ethylene cargoes, and traders estimated that around 30,000 mt of ethylene would move from the West.

But the Asian ethylene market was seen to remain stable despite the influx of deepsea materials as high freight cost kept offer prices of Europe-origin materials relatively high.

"Sellers with Europe-origin cargoes would like to achieve at least high $1,500s/mt CFR NEA to make profits," said a trading source.

On the other hand, the near-term outlook of Asian PE market was seen to be bearish in line with economic slowdown in China as well as early October holiday season there.

Earlier this week, some data indicated that China's economy has improved but PE traders still forecast the Asian PE market to come down further.

HSBC said its preliminary purchasing managers index, or PMI, which tracks activity in China's factories and workshops, advanced to a two-month high of 50.5, higher than a final reading of 50.2 in August. A reading above 50 indicates the sector is expanding.

"The market only sees the figures improving slightly from August and are still wary of [HDPE] prices falling further. I would not be surprised if prices continue on the downward path for the next few weeks," a Chinese PE trader said earlier this week.
 Print  |    add to Favorites  |    Close