Ethylene Prices Continue to Show a Bearish Rally in the US and Europe, While Prices Remain Steady in Asia

Ethylene prices have continued to decline across the US and European markets during the second week of July 2023, backed by ongoing demand weakness and sufficient inventories in the region. The macroeconomic challenges, such as high inflationary pressure and persistent rises in interest rates, have dampened the purchasing power of consumers. At the same time, in the Asian market, Ethylene prices have remained stable with no minimum fluctuations observed, compared with the previous week.

Spot Ethylene prices have inched lower in the European market, backed by tepid downstream demand and sufficient inventories. The hike in feedstock Naphtha prices had a negligible impact on the Ethylene prices within the local market.. On the demand front, the inquiries from the downstream Polyethylene and Glycol industries were tepid amidst the summer holidays, which dragged down the prices of Ethylene. The current economic crisis has forced buyers to renegotiate their contractual offtakes as market players report a decline in downstream demand. Some buyers are even considering procuring from the spot market instead to take advantage of lower offer prices. In addition, the disparity between contract and spot prices has been a major factor for chemical manufacturers in Eurozone; persistent gloomy demand and overseas competition have continued to weigh down the operating rates of the manufacturing firm in the region. Despite the weak operating rates, the availability of finished stocks of Ethylene was sufficient to meet the overall downstream demand. Therefore, prices of Ethylene in Europe's largest economy, Germany, were assessed at USD 630/MT on an FD Hamburg basis.

Furthermore, in the US market, slow downstream Polyethylene demand and sufficient stocks have dropped an Ethylene price in the domestic market. The oversupply of feedstock Ethane has limited the positive development of Ethylene in the domestic market. In addition, US manufacturing activity dropped from 46.9 in May to 46.0 in June, indicating a decline in new orders. As per the sources, new export orders declined from 50 to 47.3, reflecting a contraction zone. Therefore, Ethylene FOB US Gulf prices were assessed at USD 370/MT with a week-on-week decrement of 2.6% on July 14, 2023.

Market participants reported, a valve site belonging to INEOS in Brazoria County underwent an explosion and fire from ruptured pipelines on 13th July 2023.  As a safety measure, the authorities permitted Ethylene and Propylene, flammable gases, to burn out entirely, which lasted for about four hours. Auspiciously, no individuals were injured during the event, and the situation was successfully controlled.

On the other side, Ethylene prices have remained unchanged in the Chinese market as demand and supply maintained the equilibrium. The cost pressure from feedstock Naphtha was limited as its prices remained stagnant, as reported by market participants. In addition, the inquiries from the downstream Polyethylene were moderate in the domestic market. The downstream procurements were mainly need-on-demand basis. On the other side, the availability of finished stocks of Ethylene was stable as several plants shut down in the domestic market. In addition, Sinopec Maoming Petrochemical, Guangdong in China, and PetroChina Daqing, Heilongjiang in China, has a production capacity of 380,000 MT/year and 600,000 MT/year has off-stream Ethylene cracker amid maintenance turnarounds. Therefore, prices of Ethylene CFR Shanghai were assessed at USD 730/MT during the week ending July 14, 2023.

According to ChemAnalyst, Ethylene prices are anticipated to decrease in the US and European markets because of weak downstream demand amid high inflation and other economic uncertainties. While in the Asian market, Ethylene prices might increase due to improve demand dynamics and inadequate inventory.