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Supply constraints lead to ethylene price surge
Dec '09
The increase in prices of ethylene monomer has been more obvious since November as it has shot up by US $60-70 per ton and displays a trend of moving northwards in future days.

According to analysts, the main reason for the upward trend of ethylene monomer is mainly due to supply constraints. There has been a reduction in supply of ethylene from the Middle East to Northeast Asia and Southeast Asia markets.

The 770,000 tons per annum, ethylene glycol plant of YanSab, Yanbu, a subsidiary of Saudi Sabic had to inadvertently increase the maintenance period of its plant, which has resulted in reduced ethylene supply from Saudi Arabia.

The cracker of Marun Petrochemical in Iran has unexpectedly developed a fault and had to be shutdown, which has led to almost no cargo supply in December from Saudi Arabia and Iran.

In East Asia, the cracker of Samsung in South Korea also needed to be shut down due to an accident and operational rates of crackers in Taiwan and Japan show underutilization and merchants are also holding on to their stocks on expectations of a further increase in prices.

Along with supply constraints, there has been a surge in demand from downstream manufacturers of derivatives like PR, EG, PVC and Styrene. Tight supply is difficult to ease in short time.

Overall, Asian ethylene prices are expected to increase, mainly due to supply constraints and strong demand from downstream producers and in turn, high price of ethylene monomer will support the cost price of polyethylene and other downstream derivatives.

Fibre2fashion News Desk - China

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