Naphtha Ethylene Spread in Asia Hit Two-year High Amid Global Supply Shortage

Influenced by the widening of the demand and supply gap of Ethylene, once again the market sentiments have been disoriented as the Ethylene Naphtha spread reached a two year high along with the prices of Ethylene.

Naphtha values typically follows crude oil market trajectory, since crude value have remained in a stable to firm range since past few months, Naphtha values in the domestic market have been highly volatile.

Ethylene Naphtha spread between CFR Northeast Asia and CFR Japan, on 4^th March was assessed as 113.89%, highest in the past two weeks, whereas its values climbed to USD 589 per MT. The sudden surge in prices of Ethylene is primarily due to the tight domestic as well as overseas supply following the extreme weather conditions of US and plant turnarounds in South Korea. Following the steep rise in Ethylene, prices of downstream derivative such as Styrene, and Mono Ethylene Glycol has witnessed an astonishing upsurge in demand as the buyers are inclined to pay premium for early contract purchases. The unavailability of LPG is also one of the major reasons of high demand for Ethylene.

The continuous increase in prices of Ethylene are expected to adhere an increase in the prices of its downstream products, which will cause Ethylene consumers to conserve low margins with the buyers of end products as they might look forward to find inexpensive alternatives in order to safeguard their profit margins.

As per ChemAnalyst” the OPEC allies must try and control the crude oil price in order to ease the prices of its derivatives like Ethylene, otherwise in the upcoming days the survival of Ethylene consuming industries might become difficult specially which are operating at small scale”.