It has been a rocky few months in the olefin markets. Global ethylene exports reached a record high in August of 321,852 metric tons, while propylene approached its high-water mark with 291,941 Mt. September's discharges were strong relative to historical trends, but ended with a decline versus August's levels. Part of the decline was caused by recent maintenance and mechanical issues at crackers in the US, however, a resumption of normal production coupled with long-term expansions in consumption should force offtake higher into the beginning of next year.

The US is the largest exporter of ethylene, and accounted for more than one-third of global supply in June. In the three consecutive months that followed, US loadings progressively fell. Crackers on the US Gulf Coast, such as those operated by Formosa and BASF, conducted maintenance prior to the arrival of Hurricane Laura on August 27, which weighed on supply. Other crackers, such as those operated by Sasol, Westlake-Lotte and CP Chem, have been slow to resume activity following the storm as power supplies from local utilities have been insufficient to allow damage assessment.

With Hurricane Delta expected to reach Louisiana sometime today, production may be hampered once again. Propylene loadings have been similar to ethylene, with the US being the largest supplier. US loadings peaked in July and steadily fell in August and September. The UK made up some of the shortfall in both ethylene and propylene, thanks to a surge in output from Navigator's terminal at Teesside, which exported 33,569 Mt of ethylene in September, up 58% from the pace in June. China has soaked up ethylene supplies recently, with average offtake in the second quarter of 27,635 Mt rising to 65,727 Mt in the third quarter. Given the tightness in global supplies that developed recently, Chinese crackers are likely to import more LPG and naphtha to convert into ethylene in order to make up for the shortfall.

Naphtha spreads widened between East Asia and Northwest Europe in September, which resulted in more naphtha flowing toward Asia. The Arab Gulf was one region that answered the call, with loadings destined for East Asia rising. Northwest Europe doesn't have much spare export capacity, but naphtha loadings in the region heading to East Asia are up. China's olefin consumption is likely to continue growing in the long-term, as Vopak's Caojing terminal in Shanghai is in the middle of an expansion project that is due to enter service in 2022.