Olefins Rarity :Global Arbitrages Open

1. © 2013 Platts, McGraw Hill Financial. All rights reserved.
Olefins Rarity: Global Arbitrages Open
By Wong Wen Yin, Shashank Shekhar and Marcus Pang
Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or
+44 207 176 6024.

2. Asian traders eye rare cargo moves
• With arbitrage windows between Asia, Europe and the Americas
open for the three main olefins -- ethylene, butadiene and
propylene currently -- traders are looking to move cargoes on rare
routes and at lower freight rates between the three major markets,
industry participants and traders said the week ended April 11.
• This would be the first time that arbitrage windows for the three
olefins are open at the same time, they added.
• The ethylene arbitrage window for cargoes coming from Europe
and Mexico to Asia opened in February first and then shut for a
while to reopen in end March and it has remained opened since
then, market observers said.
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3. Olefine arbitrage windows open at same time
• The propylene arbitrage window from Asia to Europe opened in the
beginning of April and has remained opened till now, while the
butadiene arbitrage window from Asia to the US has been open
since early February till now, they added.
• "This is possibly the first time that the arbitrage windows for all the
three olefins are open at the same time," said a trader April 15.
• In this rare trading situation, freight costs for the routes have
dropped as well, sources said.
• "It is possible to get lower freight rates on rare routes as these
vessels can load other material on their way back," said a Southeast
Asia-based source.
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4. Olefinscan
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5. Rare moves for ethylene possible due to other
arbs opening
• The butadiene arbitrage, on the other hand, has been
open for the longest period -- since early February.
• The window opened first on February 7 with the FOB
Korea marker assessed at $1,465/mt and the US Gulf
marker assessed at 74 cents/lb, or $1,631/mt on an
import parity basis.
• So far this year, more than 30,000 mt of Asian-origin
butadiene for March, April and May shipments have
been traded into North America.
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6. US faced a supply crunch
• The arbitrage opened as the Asian butadiene markets faced supply
glut with production continuing at near full capacity despite weak
downstream synthetic rubber demand, while the US faced a supply
crunch with crackers entering turnarounds.
• European supplier LyondellBasell also declared force majeure on
European butadiene precisely at this time, furthering limiting
supply into the US.
• On April 11, Asian butadiene prices rose $40/mt week on week to
be assessed at $1,300/mt CFR China and $1,300/mt CFR Taiwan;
and $65/mt to $1,400/mt FOB Korea. It rose $20/mt to $1,240/mt
CFR Southeast Asia.
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7. Butadiene arbitrage opportunity to close
• In comparison in the US, butadiene was assessed April 11
at 75 cents/lb or $1,654/mt on an import parity basis.
• Considering freight for shipping butadiene to the US from
Asia is at least $300/mt, the arbitrage window seems to
be shrinking.
• "We think that the butadiene arbitrage opportunity will
soon close as prices in Asia are finally rising and South
Korean producers will soon find themselves devoid of
their comfortable inventories," a Chinese end-user said
the week ended April 11.
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9. Propylene arbitrage window opens in April
• The arbitrage window for sending propylene cargoes from Northeast Asia
and Southeast Asia to Northwest Europe opened in the first week of April,
with propylene prices on a CFR Southeast Asia basis assessed at
$1,320/mt versus Eur1,152.50/mt ($1,589.76/mt) CIF Northwest Europe
on April 4, data showed. (See relarted chart: Olefins spread between EU
and Asia).
• Given an intra-Southeast Asia freight of $80/mt, the FOB Southeast Asia
price for propylene should be around $1,240/mt, traders said.
• Adding freight from Southeast Asia to Europe, the cost to bring a 9,000-mt
propylene cargo from Southeast Asia is around $1,540/mt CIF Northwest
Europe, giving traders a profit margin of around $50/mt.
• According to a shipping report, a 9,000-mt propylene cargo was fixed to
Northwest Europe from Taiwan for mid-April loading.
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10. Butadiene arbitrage could be closing soon
• The butadiene arbitrage, on the other hand, has been open for the
longest period -- since early February.
• The window opened first on February 7 with the FOB Korea marker
assessed at $1,465/mt and the US Gulf marker assessed at 74
cents/lb, or $1,631/mt on an import parity basis.
• So far this year, more than 30,000 mt of Asian-origin butadiene for
March, April and May shipments have been traded into North
America.
• The arbitrage opened as the Asian butadiene markets faced supply
glut with production continuing at near full capacity despite weak
downstream synthetic rubber demand, while the US faced a supply
crunch with crackers entering turnarounds.
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11. Butadiene arbitrage could be closing soon
(cont…)
• European supplier LyondellBasell also declared force majeure on European
butadiene precisely at this time, furthering limiting supply into the US.
• On April 11, Asian butadiene prices rose $40/mt week on week to be assessed at
$1,300/mt CFR China and $1,300/mt CFR Taiwan; and $65/mt to $1,400/mt FOB
Korea. It rose $20/mt to $1,240/mt CFR Southeast Asia.
• In comparison in the US, butadiene was assessed April 11 at 75 cents/lb or
$1,654/mt on an import parity basis.
• Considering freight for shipping butadiene to the US from Asia is at least $300/mt,
the arbitrage window seems to be shrinking.
• "We think that the butadiene arbitrage opportunity will soon close as prices in Asia
are finally rising and South Korean producers will soon find themselves devoid of
their comfortable inventories," a Chinese end-user said the week ended April 11.
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• Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or +44 207 176
6024.

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