Moving into the third week of October 2023, Ethylene prices have drifted lower across the European market on account of bearish buying sentiments in the region. The combination of falling feedstock prices and tepid downstream demand has supported the current price trend of Ethylene. While in the US market, Ethylene prices have continued to increase due to a rise in export inquiries.

According to ChemAnalyst's latest database, prices of Ethylene have persistently dropped in the German market. The cost support from raw material Naphtha was also limited on Ethylene as its prices settled on the lower end in the given time frame. Market players reported demand for Ethylene from the downstream Polyethylene (LDPE, LLDPE, HDPE) has remained subdued amid the cost-of-living crisis, high inflation, and rising interest rates, which squeezed margins further. The spot market transactions were also average as the enthusiasm of terminal firm to enter the market were not strong, which weighed down the prices of Ethylene in the domestic market. Furthermore, the manufacturing firms were operating at low rates as manufacturers were cautious to build up the excessive inventories in the domestic market. On the other side, German manufacturing Purchasing Manager Index activity remained in the contraction zone in October (i.e., below 50), reflecting a weakening of the new orders. Meanwhile, cheap competitive offers from the Asian market have resulted in the abundant supply on the German market or ports, further pressurizing Ethylene prices. Overall, there were market players reported no supply chain bottlenecks or port congestion. Therefore, as a result, prices of Ethylene FD Hamburg were settled at USD 780/MT with a week-on-week decrement of 1.3% during the week ending 20th October 2023.

Despite the lower Natural gas prices and feedstock Ethane prices, Ethylene prices have gained an upward pace in the US market. The rise in export inquiries from the overseas market has encouraged the manufacturers to increase their Ethylene prices to gain some profit margins. Additionally, demand from the domestic market has also started to recover. However, market players reported that the supply of Ethylene has been impacted as the US market has faced a low water level in the Mississippi River, which is the major artery for shipments of several Petrochemicals, including Ethylene, has stalled the logistic activities in the domestic market. As a ripple effect, Ethylene FOB US Gulf prices were settled at USD 495/MT with a week-on-week increment of 2.1% during the same time frame.

Furthermore, a major producer of Ethylene, Dow, has reported Q3 sales. Packaging & Specialty Plastics sales were 26% lower in the quarter at $5.5bn, and segment EBIT down 40% at $476m. Domestic prices dropped 20% year on year in the segment on lower Polyethylene (PE) and olefin prices in all regions. In addition, segment earnings were also down due to lower integrated PE margins.

As per ChemAnalyst estimation, Ethylene prices are likely to decrease in the US and German markets due to further expectations of a decline in feedstock prices. The demand for Ethylene from the downstream derivative industry is anticipated to average. Furthermore, looking at the seasonally weaker Q4 sales, Dow is expected to be down by 3-7%.