1. AsianPE-ethylenemarginstoturnpositive once steamcrackersreturnfromshutdowns
Singapore (Platts)--5May2015/443 am EDT/843 GMT
Asianpolyethylene-ethylene marginsare expectedtoreturntopositive
territory byJulyat the earliest,asfeedstockethylene pricesshouldease
off fromcurrent highsonce steamcrackers fullyreturnfromplannedand
unplannedoutages,industrysourcessaidTuesday.
PE onthe otherhand,isexpectedtoremainlargelysteadyamid
seasonallybearishdemandinJune andsimilarlylow supplyfromMideast
producers,sourcesadded.
Soaringethylene pricesonthe backof tightsupplieshave pushed
PE-ethylene marginsintonegativeterritorylastmonth.
The spreadbetweenbenchmarkCFRFar East AsiaHDPE filmandCFR
NortheastAsiaethylene priceswasatminus$5/mt Monday, afterhavingturned
negative onApril 13,Plattsdata showed.
BenchmarkHDPE wasassessedat$1,375/mt CFRFar East Asiaandethylene
at $1,380/mt CFR NortheastAsiaMonday.
The surge in ethylene wasattributedlargelytoaheavierturnaround
seasoninAsia'skeyethyleneproducerSouthKorea,withthree outof the 11
naphtha-fedsteamcrackersinthe countryhavingscheduledannualturnarounds
duringQ2. The shutdownsaccountedforaround35% of South Korea'stotal
ethylene productioncapacityof 7.86 millionmt/year.
Addingtothis,a fewnaphtha-fedsteamcrackersinAsiawere shutfor
unplannedoutages,furthertighteningregionalsupplyandpushingprices
higher.
Thailand'sPTTfor example,hasshutits515,000 mt/yearsteamcrackerin
Map Ta Phutoverlate-Marchto end-April foremergencyrepairs.AndinJapan,
JX NipponOil andEnergywill restartits404,000 mt/yearsteamcracker in
2. Kawasaki byearlyMay, afterhavingshutthe planton April 24 forunplanned
repairs.
Furthersupportforethylene alsocame frompositive ethylenederivatives
margins,notablyforstyrene monomer,sourcesnoted.
The styrene-ethylene marginwasestimatedat$140.90/mt on May 4, withSM
pricesdrivenhigherbytightsuppliesfromSouthKoreadue toheavy
turnaroundsoverMarch-May, a closedarbitrage window fromthe USto Asiaas
productswere pulledtothe more bullishEuropeanmarketoverQ1-Q2,as well
as lowinventorylevelsinEastChina.
INTEGRATEDPE PRODUCERSSEE POSITIVEMARGINS,COMPETITIVEMIDEAST EXPORTS
Still,afewindustrysourcesfeltthatimpactfromthe current high
ethylene pricesonactual operational marginswouldbe limitedtojustafew
end-users,asmanyPEproducersare integratedrefineryandpetrochemical
complexeswithnospotethylenepurchases,withthe exceptionof afew
isolatedusersinSoutheastAsia.
Accordingto industryobservers,marginsatintegratedPEproducerswere
estimatedatabove $400/mt, thanksto relativelylow naphthaprices.
Ethylene costsforNortheastAsia'sintegratedcomplexesare typically
calculatedbasedona multiplicationfactorof 1.4 on naphthaprices,sources
added.
OnMonday, marginsof integratedproducersstoodat$406/mt, after
factoringina conversioncostof $150/mt, basedonthe assessedMeanof
PlattsJapannaphthavalue at $584.875/mt, Plattscalculationsshowed.
SouthKoreanPE producersalsotake directionfromthe higher-priced
NorthwestEuropeanmarketratherthanNortheastAsia,asmostof the country's
premiumPEproducts,such as metallocene linearlow densityPE,are exported
3. to the EU since theyenjoydutyexemption,tradersinSouthKoreasaid.
InEurope,HDPE filmwaslastassessedatEur1,500/mt ($1,672/mt) FD
NorthwestEurope onApril 29.
While inJapan,PEis mostlydomesticallyproducedandconsumedandis
not traded inthe spotmarket,makingthe spotNortheaastAsianethylene and
PE marketsdisconnected.
--HengHui,hui.heng@platts.com
--FumikoDobashi,fumiko.dobashi@platts.com
--MichelleKim,mihee.kim@platts.com
--EditedbyIrene Tang,irene.tang@platts.com
PC0100
ANALYSIS:Asiaisomer-MXtorecoverbyend-Marafterheadingfurthersouth
Singapore (Platts)--10Nov2014/1052 pmEST/352 GMT
* Pricestorecoverby end-MarafterJan/FebholidayseasoninAsia
* DemandcentershiftstoChinawithlarge PTA expansions
* Asia'soverall supplyhitbyKoreandemand,nonew MXplantsin2015
Asiaisomer-grademixedxylenesare poisedforfurtherweaknessasthe
yearcomesto an end,but recoveryisnotfar away as an uptickisexpectedby
the endof Q1 2015 withthe returnof Chinese demandamidastructurallyshort
market,industrysourcessaidlastweek.
Isomer-MXpriceshadfluctuatedwithinawide bandof $830-1,200/mt FOB
Koreafromthe start of the yearto November7,accordingto Plattsdata.
Pricesare currentlyat the lowerendof the range,withlevelslastassessed
at $841/mt FOBKorea onMonday and $877/mt CFR Taiwan.
Sourcesexpectsimilarprice volatilityin2015 as comparedwith2014,
due to some uncertaintiesinthe market.The lackof clarityas to when
4. downstreamparaxylene plantsinthe regionwouldactuallybe kickingoff
operations,andhence tradersgettingsweptupinthe dominantmarket
sentimentof the day,will leadtothe volatility,theyadded.
Decemberistypicallyaweakmonthasproducerstry to clearstockto
remaincash richfor the year-endaccountingclose,sourcessaid.Januaryand
Februaryare similarlybearishinNortheastAsiaasactivityslowsamonth
priorto the Lunar NewYearholidays -- whichwill be inFebruarythisyear --
before pickingupafewweeksafter.
BADNEWS FOR UNINTEGRATED PRODUCERSIF PX-MXMARGIN NARROWS
Withisomer-MXpricespoisedtorecoverlaterinQ1,thismarginmay
narrow again,whichspellsbadnewsforunintegratedproducerswhowouldhave
to buyhighcost isomer-MXforPXproduction,marketobserverssaid.MX
accounts for80-85% of the PX salesprice,theyadded.
The PX-MXmarginis holdingat$150-200/mt inNovembersofar,whichis
belowthe breakevenlevel,sourcessaid.Non-integratedPXproducersusingMX
as feedstocktypicallyneedthe spreadbetweenthe twoproductstobe at least
$200-250/mt to breakeven.
The largestoutletforAsianMX isin the productionof PXin the region.
Around95% of isomer-MXgoesintoPX,withthe restintosolventsand
gasoline.Around1%of MX is usedinthe productionof orthoxylene.
Secondaryconsiderations,suchasthe orthoxylene-isomerMXspread,is
expectedtoremainnegativewiththe startupof new OXcapacitiesinAsia,
while the MX-feedstocktoluenespreadwouldturnpositiveandMX-naphthaprice
differentialwouldbe more lucrativeif MXpricesfirm, sourcessaid.
DEMAND CENTER SHIFTSTO CHINA WITH LARGE PTA EXPANSIONS
5. Chinahasthe biggestgrowthinMX consumptioninAsiain2015, industry
expertssaid.Chinawillneedmore MXas a resultof an increasedneedto
produce more PX,shouldall the 13 millionmt/yearof new pure terephthalic
acid projectsinthe countrycome on streamas plannedin2015, theynoted.
Chinaimportedaround516,203 mt from JanuarythroughSeptemberandis
the secondlargestimporterinAsia,laggingbehindTaiwanataround650,000
mt for the nine months,accordingtocustomsstatistics.
But there are some barriersto the risingdemand.Internationaltraders
are sometimescautiousaboutChinese manufacturedmaterial -- the Chinese
specificationstandardsare oftennotonpar withinternationallyrecognized
AmericanSocietyforTestingandMaterials,orASTM, standards,sourcessaid.
The unfamiliarityandriskof defaultsometimesresultsininternational
tradersshyingawayfrom trade withnew China-basedentities,theyadded.
SUPPLY SCENARIOIN 2015
SouthKoreaisexpectedtocontinue exportinglessMXdue to its
increasingneedtosupplyfeedstocktoitsnew PXunitsdomestically,as
around47% of Asia'snewPXcapacityexpansionstotalling7millionmt/year
has come online inthe NortheastAsiancountrysince June.
SouthKoreaexported243,996 mt up to September,whichwasalready
showinga31% decrease yearonyear from2013 figures.Ithadthe largestPX
expansioninAsiain2014 and the newdownstreamPXcapacityisexpectedto
run more efficientlyandhave a higheroperatingrate in2015.
Meanwhile,there will be feweropportunitiesin2015 for the arbitrage
flowfromthe US to Asiaas comparedto 2014 since there are lessdownstream
expansionsin2015, buyerssaid.
There washardlyany US-to-Asiamaterial flow in2014, accordingto the
6. buyers,asAsianMX pricesdidnot rise substantiallyoveraprolongedperiod
for an arbitrage toopen,sourcessaid.
Furtherhittingsupplies,nonewMXprojectsare onthe boardfor 2015,
but in2016 a feware setto come on stream.These include Japanese refiner
ShowaShell's200,000 mt/yearMX unitinYokkaichi andSouthKoreanLotte's
1.2 millionmt/yearMXplantinDaesan.
"AddingnewMXunitsto supplyPXtoplugshort-termgapsmay seeman
easierwayforsome refiners,ratherthanbuildingawhole new crackercomplex
that requireshuge expenditureandjustificationforall the downstream
productsit has to be able to sell,"saidaNortheastAsiantrader.
TRADED VOLUMES TO SHRINK
Marketparticipantsexpecttradesinthe MX spotmarketto shrinksince
PX producersare increasinglybuildingMXplantsandoptingto be an
integratedchain,insteadof procuringthe feedstockfromthe openmarket.An
example of thisisthe jointventure betweenthe twolargestMXbuyersin
SouthKorea-- Lotte Chemical andHyundai Cosmo.The plantisa JV between
Lotte Chemical andHyundai Oilbank -- the parentcompanyof Hyundai Cosmo,and
isscheduledtocome on streaminthe secondhalf of 2016, Plattspreviously
reported.Outputcapacityof MX at the proposedcomplex isplannedat1
millionmt/year,butthiscouldgoup to 1.2 millionmt/year.
Asthe end-applicationsof isomer-MXare inconsumerledindustriessuch
as clothesandmanufacturingof plasticbottles,itissafe toassume Asia's
demandforMX mightgraduallygrowinline withGDPgrowthinthe long-term,
saidPlattspetrochemicalsanalystHetainMistry.
UsingIMF statisticsonprojectedAsiandemandupto2018, translatesto
MX consumptiongrowingto36 millionmtin2016 and up to 42 mil mt by2020
7. -- basedon compoundannual growthrate calculations -- maintainingitsAsian
marketshare of 70-80% of global demand,he said.
--HengHui,hui.heng@platts.com
--EditedbyGeethaNarayanasamy,geetha.narayanasamy@platts.com
