Bullish Run for Ethylene Persists in the US and Europe Amid Supply Limitations

Hamburg, (Germany): The European Ethylene spot market continued to see limited supply during the first week of September, with a rise in restocking activity noted in Ethylene and derivative markets ahead of the upcoming turnaround season. The strong feedstock prices have further contributed to the Ethylene prices following an uptrend in the regional market.

The prices of Ethylene have remained on a firm note in the German market amid tight material availability. Despite the low upstream crude oil prices, the feedstock Naphtha prices have been observed on the higher end which led to the high production cost of Ethylene, keeping the prices elevated in the domestic market. Furthermore, the domestic supply of Ethylene has tightened further over the week stemming from the reduced operating rates in the domestic market. Also, limited imports from Asia, the Middle East, and the US amid production issues in the region have further affected the market supply of Ethylene. As a result, prices of Ethylene FD Hamburg were settled at USD 1000/MT with a weekly increment of USD 40/MT during the week ending 6th September.

On the other side, spot demand for Ethylene was perceived amid replenishing activity ahead of turnaround season in the Naphtha market. Buyers are interested in purchasing extra volumes for September and October, as they expect higher import prices and less availability. However, overall demand for Ethylene from the downstream Polyethylene industry has not significantly improved in the domestic market. Several market players anticipate a revival in demand from the downstream industry in the near term which may consequently escalate the demand for Ethylene in the domestic market.

Similarly, in the US market Ethylene prices have demonstrated an increment of USD 30/MT on a weekly basis, even though, feedstock Ethane prices have declined in the given timeframe. An uptick in the prices was supported by the maintenance at Enterprise Products Partners (EPC) cavern in Mount Belvieu, Texas coupled with lower inventories in the last month, placed an upward pressure on the spot prices. In addition, the domestic demand for Ethylene from the downstream Polyethylene industry has been steady over the week. Meanwhile, export demand for Ethylene has improved in an effort to refill the inventories. Thus, prices of Ethylene spot FOB US Gulf were settled at USD 690/MT on 6th September.

Looking ahead, ChemAnalyst expects prices of Ethylene might remain on the higher end across the US and European markets in the anticipation of rise in upstream values. While there is a glimmer of hope among some sellers for an uptick in demand by the end of September and into October, easing concerns over weak buying interest. Additionally, the availability of Ethylene is expected to remain tight as operating rates are expected to improve in the regional market. Also, freight charges are likely to increase until Golden Week festival which may further boost the import prices of Ethylene.