Will capacity additions cast cloud on ethylene upsurge in Asia?
Ethylene has been trading slightly above China’s import LLDPE film market for two weeks now, as LLDPE prices have gained only 12% over the same period.
From this perspective, the upcoming capacity additions in Asia may limit some upside for ethylene, moreover, expectations of a price correction are coming to the forefront.
Spot prices hover around 9-month high
From the week of April 20, prices of spot ethylene have more than doubled from $355/ton to $840/ton CFR China, and from $330/ton to $790/ton on CFR SEA basis, according to ChemOrbis Price Wizard data. Spot prices are currently hovering around their highest levels since September 2019.
The sharp gains came on the back of restocking activity as countries gradually came out of lockdowns and relatively tight supply amid maintenance shutdowns, market players said.
China came out of its COVID-19 related lockdown in early April while Vietnam eased restrictions in late April. Other countries in Southeast Asia gradually started easing lockdowns from May, with significant relaxation of measures from late May and early June.
New ethylene capacities coming up
However, new ethylene capacities are coming, which may impact on the uptrend by increasing supply.
Among those coming onstream in China are Sinochem’s 1 million tons/year unit in Quanzhou with operations slated to later this year, SK Innovation’s expansion of its 400,000 tons/year unit and Zhejiang Satellite’s 2.5 million/tons plant due to start in the third quarter - based on ChemOrbis production data.
Adding to the new capacities are also those plants resuming operations after turnarounds.
Luxi Chemicals’ 180,000 tons/year unit and Nanjing Chemgzhi’s 135,000 tons/year are expected to be restarted later this month in China. Other plants in the region returning from turnarounds are FPC’s 1 million tons/year cracker in Taiwan and MItsui Chemicals’ 450,000 tons/year cracker in Japan.
PE capacities also coming onstream
The higher feedstock also benefited prices of most PE products during the period and the expected increased supply of ethylene from new capacities may impact on the market as well.
Adding the increased feedstock supply are new PE capacities such as Hengli’s 400,000 tons/year unit and Yantai Wanhua’s HDPE and LLDPE units in China.
Meanwhile, Malaysia’s PRefChem plans to restart production by September. It houses 350,000 tons/year LLDPE and 400,000 tons/year HDPE units.
To track the most updated ethylene and PE production news, please see PE Production News.
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