Platts Petrochemical: Global Olefin Arbitrages Open

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Olefins Rarity :Global Arbitrages Open

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Platts Petrochemical: Global Olefin Arbitrages Open

  1. 1. © 2013 Platts, McGraw Hill Financial. All rights reserved. Olefins Rarity: Global Arbitrages Open By Wong Wen Yin, Shashank Shekhar and Marcus Pang Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or +44 207 176 6024.
  2. 2. Asian traders eye rare cargo moves • With arbitrage windows between Asia, Europe and the Americas open for the three main olefins -- ethylene, butadiene and propylene currently -- traders are looking to move cargoes on rare routes and at lower freight rates between the three major markets, industry participants and traders said the week ended April 11. • This would be the first time that arbitrage windows for the three olefins are open at the same time, they added. • The ethylene arbitrage window for cargoes coming from Europe and Mexico to Asia opened in February first and then shut for a while to reopen in end March and it has remained opened since then, market observers said. 2
  3. 3. Olefine arbitrage windows open at same time • The propylene arbitrage window from Asia to Europe opened in the beginning of April and has remained opened till now, while the butadiene arbitrage window from Asia to the US has been open since early February till now, they added. • "This is possibly the first time that the arbitrage windows for all the three olefins are open at the same time," said a trader April 15. • In this rare trading situation, freight costs for the routes have dropped as well, sources said. • "It is possible to get lower freight rates on rare routes as these vessels can load other material on their way back," said a Southeast Asia-based source. 3
  4. 4. Olefinscan 4
  5. 5. Rare moves for ethylene possible due to other arbs opening • The butadiene arbitrage, on the other hand, has been open for the longest period -- since early February. • The window opened first on February 7 with the FOB Korea marker assessed at $1,465/mt and the US Gulf marker assessed at 74 cents/lb, or $1,631/mt on an import parity basis. • So far this year, more than 30,000 mt of Asian-origin butadiene for March, April and May shipments have been traded into North America. 5
  6. 6. US faced a supply crunch • The arbitrage opened as the Asian butadiene markets faced supply glut with production continuing at near full capacity despite weak downstream synthetic rubber demand, while the US faced a supply crunch with crackers entering turnarounds. • European supplier LyondellBasell also declared force majeure on European butadiene precisely at this time, furthering limiting supply into the US. • On April 11, Asian butadiene prices rose $40/mt week on week to be assessed at $1,300/mt CFR China and $1,300/mt CFR Taiwan; and $65/mt to $1,400/mt FOB Korea. It rose $20/mt to $1,240/mt CFR Southeast Asia. 6
  7. 7. Butadiene arbitrage opportunity to close • In comparison in the US, butadiene was assessed April 11 at 75 cents/lb or $1,654/mt on an import parity basis. • Considering freight for shipping butadiene to the US from Asia is at least $300/mt, the arbitrage window seems to be shrinking. • "We think that the butadiene arbitrage opportunity will soon close as prices in Asia are finally rising and South Korean producers will soon find themselves devoid of their comfortable inventories," a Chinese end-user said the week ended April 11. 7
  8. 8. Want more free daily new and information? 8
  9. 9. Propylene arbitrage window opens in April • The arbitrage window for sending propylene cargoes from Northeast Asia and Southeast Asia to Northwest Europe opened in the first week of April, with propylene prices on a CFR Southeast Asia basis assessed at $1,320/mt versus Eur1,152.50/mt ($1,589.76/mt) CIF Northwest Europe on April 4, data showed. (See relarted chart: Olefins spread between EU and Asia). • Given an intra-Southeast Asia freight of $80/mt, the FOB Southeast Asia price for propylene should be around $1,240/mt, traders said. • Adding freight from Southeast Asia to Europe, the cost to bring a 9,000-mt propylene cargo from Southeast Asia is around $1,540/mt CIF Northwest Europe, giving traders a profit margin of around $50/mt. • According to a shipping report, a 9,000-mt propylene cargo was fixed to Northwest Europe from Taiwan for mid-April loading. 9
  10. 10. Butadiene arbitrage could be closing soon • The butadiene arbitrage, on the other hand, has been open for the longest period -- since early February. • The window opened first on February 7 with the FOB Korea marker assessed at $1,465/mt and the US Gulf marker assessed at 74 cents/lb, or $1,631/mt on an import parity basis. • So far this year, more than 30,000 mt of Asian-origin butadiene for March, April and May shipments have been traded into North America. • The arbitrage opened as the Asian butadiene markets faced supply glut with production continuing at near full capacity despite weak downstream synthetic rubber demand, while the US faced a supply crunch with crackers entering turnarounds. 10
  11. 11. Butadiene arbitrage could be closing soon (cont…) • European supplier LyondellBasell also declared force majeure on European butadiene precisely at this time, furthering limiting supply into the US. • On April 11, Asian butadiene prices rose $40/mt week on week to be assessed at $1,300/mt CFR China and $1,300/mt CFR Taiwan; and $65/mt to $1,400/mt FOB Korea. It rose $20/mt to $1,240/mt CFR Southeast Asia. • In comparison in the US, butadiene was assessed April 11 at 75 cents/lb or $1,654/mt on an import parity basis. • Considering freight for shipping butadiene to the US from Asia is at least $300/mt, the arbitrage window seems to be shrinking. • "We think that the butadiene arbitrage opportunity will soon close as prices in Asia are finally rising and South Korean producers will soon find themselves devoid of their comfortable inventories," a Chinese end-user said the week ended April 11. 11
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  13. 13. About Platts 13 • About Platts: Founded in 1909, Platts is a leading global provider of energy, petrochemicals, metals and agriculture information and a premier source of benchmark prices for the physical and futures markets. Platts' news, pricing, analytics, commentary and conferences help customers make better-informed trading and business decisions and help the markets operate with greater transparency and efficiency. Customers in more than 150 countries benefit from Platts’ coverage of the biofuels, carbon emissions, coal, electricity, oil, natural gas, metals, nuclear power, petrochemical, shipping and sugar markets. A division of McGraw Hill Financial (NYSE: MHFI), Platts is headquartered in New York with approximately 900 employees in more than 15 offices worldwide. Additional information is available at http://www.platts.com. • About McGraw Hill Financial: McGraw Hill Financial (NYSE: MHFI), a financial intelligence company, is a leader in credit ratings, benchmarks and analytics for the global capital and commodity markets. Iconic brands include: Standard & Poor’s Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power and McGraw Hill Construction. The Company has approximately 17,000 employees in 29 countries. Additional information is available at www.mhfi.com. • Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or +44 207 176 6024.
  14. 14. © 2014 Platts, McGraw Hill Financial. All rights reserved. 14

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