Asia ethylene-propylene falls to four-month low, butadiene hits six-month high

S&P Global Platts data shows that on June 18, the key spread of CFR Northeast Asia ethylene and benchmark C+F Japanese naphtha cargoes was assessed at $227.
875/ton, a daily decline of $32.
625/ton, lower than the comprehensive producer's price.
Typical break-even point is $250/ton
.

Naphtha-based steam crackers in Asia may now consider lowering operating rates as profit margins on key olefins fall into negative territory, industry sources said on June 18
.

According to Platts data, this is the first time since May 11, 2020, that the ethylene-naphtha oil price differential has fallen below $250/ton, when it was $204/ton
.

"For ethylene, at these prices, it is more economical to buy from the spot market than to produce it yourself, given the high crude oil and naphtha prices," an Asian producer said
.

Asia ethylene-propylene falls to four-month low

Platts data shows that on June 18, CFR Northeast Asia ethylene prices fell by $40/ton month-on-month, hitting a four-month low of $860 due to weak profit margins in the ethylene oxide, monoethylene glycol and styrene sectors.
USD/ton
.

Platts data shows that on June 18, CFR China propylene prices stabilized daily at a four-month low of $980/ton
.

According to Platts data, on June 18, the price difference between CFR China propylene and naphtha was US$347.
87/ton, an increase of US$7.
37/ton from the previous day, which was the lowest level since February 2020
.

The ethylene and propylene markets have been under pressure due to concerns about oversupply following the start-up of a new steam cracker in South Korea, market sources said
.

LG Chem started up its new naphtha-based steam cracker in Yeosu, South Korea on June 11
.
The steam cracker is capable of producing 800,000 tons/year of ethylene and 400,000 tons/year of propylene
.
As previously reported by Platts, LG Chem aims to be 100% operational by June 22
.

Another mixed-feed steam cracker, owned by GS Caltex and Lotte Chemical, started operations later in the week to June 18 and is now operating at about 60% capacity
.
The cracker, also located in Yeosu, South Korea, is capable of producing 700,000 tons/year of ethylene and 500,000 tons/year of propylene
.

The naphtha market is well supplied

While the commissioning of new crackers has boosted overall naphtha demand, declining olefin margins will lead to lower operating rates for some crackers, thereby limiting demand for feed naphtha
.

Asian naphtha markets face long-term supply and competitive pricing from sellers, sources said, with lower crude prices likely to mean lower cargo volumes for benchmark C+F Japan naphtha
.

Benchmark C+F Japanese naphtha cargoes were last assessed at $632.
62/ton on June 18, down $7.
38/ton on a daily basis, Platts data showed
.
Notably, this is a drop since the multi-year high of $645.
62/t reached on June 14, which was reached on October 23, 2018, at $659.
37/t
.

Butadiene hits six-month high

Platts data shows that the Asian butadiene market is bullish.
On June 18, the CFR China butadiene price rose $90/ton from the previous month, reaching a six-month high of $1,290/ton
.
According to industry insiders, the Asian butadiene market is driven by strong demand in the United States, and the spot price of butadiene in the United States has been hovering around $1,600-1,700/ton CIF USG
.

According to market sources, about 22,000 tons of butadiene will be shipped from Asia to the United States for loading in June-July, which tightens the supply in the Asian butadiene market
.

Butadiene inventories in China had been falling in the weeks leading up to June 18, in line with positive exports from Asia
.
Industry sources estimate that China's butadiene stocks fell by about 7,000 tonnes to 29,000 tonnes in the week to June 18
.

As a result, the Asian butadiene-naphtha spread rose $97.
37/t on the day to $657.
87/t on June 18, the highest level since December 23, 2020, when the price calculated, according to Platts data For 659.
37 US dollars / ton
.
The spread is also better than the typical breakeven spread of $300-350/t
.

Market participants said bullish butadiene spreads are unlikely to prevent steam crackers from reducing run rates
.

“Compared to ethylene or propylene, the capacity
of butadiene is very small.
Positive butadiene margins cannot make up for the loss of ethylene and propylene
.
”

An ordinary naphtha feed steam cracker with an ethylene capacity of 1 million tons/year has a propylene capacity of about 500,000 tons/year, about half of the ethylene capacity, and a butadiene capacity of about 100-200,000 tons/year
.