Ethylene prices in Asia breached the $1,000/mt psychological barrier Thursday -- the first time since November 19, 2010 -- as lower crude as well as weak demand and sentiment pressured prices lower, market sources said.
The CFR Northeast Asia price was pegged at $995/mt Thursday afternoon.
"Crude [NYMEX] dropped by $2.94/barrel [overnight]. Buyers like us, of course want to cut the price further," a market source said, adding that his bid was at $950/mt CFR China.
Sellers, on the other hand, were still resistant to dropping offers below the four-digit figure, hanging on to selling indications of "mid-$1,000s."
"The crude fall needs to be sustained for a week or so, at least," a seller said.
Ethylene has been on a sharp downtrend since April 16, shedding $408/mt or 29.1% over this period. This was on the back of weak demand, especially from downstream end-users. Polyethylene has been under strong downward pressure due to weak demand for finished products amid economic uncertainty in Europe.
Linear low density polyethylene has fallen, $165/mt or 12%, over April 16-May 30, to be assessed at $1,210/mt CFR Far East Asia Wednesday.
Some market participants were, however, skeptical about the fall in ethylene.
"With bids below $1,000/mt CFR basis, you are talking sub-$900/mt on an FOB basis," a trading source said. "That doesn't even cover variable costs."
Ethylene production margins have mostly been in the negative territory since May 23, 2011. Based on a theoretical cracking cost of $350/mt and naphtha being assessed at $849.63/mt CFR Japan Wednesday, the breakeven cost to produce ethylene is around $1,200/mt.
