Asian ethylene makers have not profited recently

According to a recent report from Dow Jones News, Asian ethylene producers are facing a bleak profit outlook for at least the next two months. This is primarily due to an oversupply of crude oil and persistently high international crude prices, which have squeezed margins across the sector. Although several Asian ethylene producers had already reduced output in early March, their profits have not rebounded to levels seen in January or February. The reason? The Middle East continues to flood the Asian market with large volumes of natural gas-based ethylene, adding to the supply pressure. In the coming weeks, more ethylene cargoes are expected to arrive, further intensifying competition. Notably, South Korea’s Lotte Dashan Petrochemical Company is set to increase its naphtha cracker capacity by over 50%, reaching 1 million tons per year. Meanwhile, Japan’s Mitsubishi Chemical Corp. may restart its second naphtha cracker in Kashima, which was shut down in December 2023 following a fire. The unit has a capacity of 476,000 tons per year and could come back online within the next two weeks. In most parts of Asia, ethylene production relies on naphtha, which is derived from crude oil. As a result, rising crude oil prices have significantly impacted the profitability of these producers. Currently, ethylene prices in Northeast Asia have dropped by $200 per ton compared to a month ago. However, the sharp increase in crude oil futures has driven up naphtha prices in Japan by around $58 per ton, pushing the price to $914.5 per ton. This has left ethylene producers in a tough spot, with losses of approximately $171 per ton. With continued oversupply and high input costs, this challenging situation is unlikely to improve soon.

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