The spread between ethylene and naphtha prices in Asia narrowed $12.25/mt day on day to $615/mt Wednesday, its lowest in nearly four months, amid a fast falling spot ethylene market, S&P Global Platts data showed.
On Wednesday, CFR Northeast Asia ethylene slid $10/mt day on day to be assessed at $1,045/mt, while CFR Japan naphtha inched up $2.25/mt to be assessed at $430/mt.
The spread was last lower on February 18 this year, when it was calculated at $600.125/mt. But it is still higher than a typical breakeven spread of $350/mt.
The Asian ethylene market, which had been on an uptrend earlier this year, started to make a downturn from the middle of May, pressured by an influx of deepsea supply as well as falling derivatives market, notably styrene monomer.
Margins for SM had climbed to a 10-month high of $171.30/mt on March 3 this year, boosting ethylene demand in the region.
According to Chinese customs data, China's ethylene imports jumped 23.5% month on month to 130,076 mt in March.
But with SM margins now weakening, spot ethylene demand in the region also started falling.
On May 13, the Asian SM margin dipped briefly into negative territory at minus $4.10/mt, from $9.40/mt the day before.
An influx of deepsea ethylene supply from the Americas, Middle East and Europe also pressured down the Asian ethylene market. According to shipping reports, around 68,700 mt of deepsea cargoes have been loaded for May and June from Saudi Arabia, Europe and the US.
Looking forward, a few market sources said Asia's ethylene market would likely be supported, as some key steam crackers in the region are due to shut from August for annual maintenance.
Taiwan's Formosa Petrochemical Corp. for one, plans to shut its 1.03 million mt/year No. 2 steam cracker in Mailiao from August 1 to September 22 for maintenance.
