Asian Ethylene Market Gains Stability After Dull Q3, Oversupply Pressure Looms Over the Industry

The Ethylene market in Asia showed signs of stability towards the end of October 2024, following a rough third quarter marked by oversupply, rising feedstock costs, and weak demand from key markets, particularly China. Despite the ongoing challenges in the petrochemical sector, prices for Ethylene held steady throughout the month, preventing any further sharp declines.

Although, the broader dynamics of the market remained bleak as the oversupply of Ethylene continued to weigh on the market, with global capacity expansions, particularly in China and the Middle East, contributing to a continued glut of Ethylene and its derivatives, such as polyethylene and polypropylene. Despite this, the market in October managed to avoid further significant price drops that were seen during September, as capacity utilization rates in key producing regions, including South Korea and Japan, showed some signs of stabilization. This was attributed to several factors, including a slight slowdown in new production intensity and the seasonal demand adjustments typically seen in the petrochemical sector toward the end of the year.

In addition to the oversupply pressures, naphtha prices also remained elevated throughout October in comparison to the previous month, driven by higher crude oil prices and global refining economics. This kept the cost of production for Ethylene producers high, reflected in October’s stagnancy. On the other hand, the demand in China, the largest consumer of petrochemical products, remained subdued, with weak consumption in critical sectors such as construction, automotive, and electronics.

Looking ahead, the Ethylene prices in Asia are expected to move southwards throughout the final quarter of 2024, as the global oversupply of Ethylene will continue to exert downward pressure on prices. The increased production capacity in China and the Middle East, coupled with weak demand growth, will likely prevent any substantial price increases in the near term. While production cuts could be a potential factor in supporting prices, the global market imbalance will persist through 2025 unless a significant change in demand occurs. Adding onto the pressure, naphtha prices are also expected to remain volatile due to crude oil price fluctuations. If naphtha prices continue to climb, Ethylene margins will likely come under further strain, making it difficult for producers to raise prices despite a more balanced market.

Moreover, China’s economic recovery rate also remains as a key variable. Given the country’s construction, automotive, and electronics sectors continue to face sluggish growth, the demand for Ethylene derivatives such as polyethylene and polypropylene will remain muted. This will keep downward pressure on prices. Any potential policy changes in China to stimulate demand could provide some upside potential for Ethylene prices, but that scenario remains uncertain.

Therefore, the Ethylene market in Asia remains in a precarious balance heading into the final months of 2024. With the oversupply of Ethylene and high feedstock costs continuing to weigh on producers, prices are expected to remain stable but under pressure. Demand recovery in China and other key markets will be crucial to determining whether a more substantial rebound is possible. Without significant changes in global economic conditions or a reduction in production capacity, Ethylene prices are likely to stay depressed through the end of the year, with limited potential for any major recovery until 2025.