After demonstrating a bullish run over the past few weeks, Ethylene prices have surprisingly dropped in the European market during the final week of September 2023. The decline in the prices was majorly attributed to the weak feedstock prices as well as stable downstream demand. In addition, cheap import offers from the Asian market have further weighed down the prices of Ethylene in the regional market.

According to ChemAnalyst's latest database, prices of Ethylene have declined by USD 10/MT in Europe's largest economy, Germany. Despite the high crude oil prices, the feedstock Naphtha prices have unexpectedly dropped after persistently rising for more than four weeks. Consequently, the feedstock cost support has eased in the domestic market. Market players reported that Ethylene prices had temporarily dropped, and it is expected to increase in the coming weeks. On the demand front, the inquiries from downstream Polyethylene were steady as consumption from the packaging and the plastic industry has not yet improved in the domestic market. According to market sources, the German construction Purchasing Manager's Index (PMI) dropped from 41.5 in August to 39.3 in September 2023, reflecting the challenging demand conditions faced by constructors amid higher borrowing rates and uncertainty among customers, which consequently impacted the demand for Ethylene in the domestic market. In addition, the spot transactions were also average, as the enthusiasm of the terminal firm to enter the market was not strong. On the other side, the annual inflation rate declined from 5.2% in August 2023 to 4.3% in September 2023, but the recently higher crude oil prices are casting a shadow over prospects for beating inflation back down to the central bank's target of 2%.

The manufacturing firms were operating at reduced rates on the supply front as demand from the downstream industry had not fully recovered in the domestic market. In addition, German manufacturing activity remained mired in a downturn in September amid weak demand and rapidly falling output. Meanwhile, the cheap competitive offers from the Asian market have further pressured the prices of Ethylene in the German market. According to data from Xeneta, average long-term rates in the Far East- North Europe Lane have declined 69% year to year to $ 2,274 per FEU in September. Average long-term rates in the Far East-Mediterranean Lane are down 63% year to year to $ 2,332 per FEU. As a ripple effect, prices of Ethylene FD Hamburg were settled at USD 800/MT during the week ending 29th September 2023.

As per ChemAnalyst estimation, prices of Ethylene are likely to increase at the beginning of Q4 due to further expectations of a rise in feedstock Naphtha prices. International crude oil prices are anticipated to rise amid a tight supply outlook as Moscow temporarily bans fuel exports. Market players projected oil prices would settle at $100/barrel, which might impact the prices of several commodities, including Ethylene. However, demand for Ethylene from the downstream Polyethylene industry is not expected to improve in Q4 of 2023, but it will not lead to a price decline in the European market.