The prices of spot Ethylene have been consistently increasing in the German Market during the third week of September 2023. The feedstock Naphtha prices have continued to rise, resulting in high manufacturing costs of Ethylene in the domestic Market. On the upstream front, international Crude oil prices have remained strong. The Brent crude oil prices were settled at $ 93.04/ barrel with a week-on-week increment of 2.6% on 15 September 2023. The price increases of Ethylene come as speculations of extended production cuts by OPEC+ nations to balance the Market.

Furthermore, there's an expectation that Saudi Arabia will continue to decrease its oil production by another 1 million barrels until October, leading to further supply constraints and potential price increases in the crude oil market, subsequently reflecting in the production costs of several commodities, including Ethylene. On the other side, the contraction in the manufacturing sector over the past few months has been weighing upon the inventory level of Ethylene, which promoted the manufacturers to revise their prices to gain some profit margins. As a result, prices of Ethylene FD Hamburg were settled at USD 760/MT with a weekly increment of USD 40/MT during the week ending 15 September 2023.

However, market participants reported that demand for Ethylene from the downstream Polyethylene has remained soft, and downstream procurements were mainly based on a need-on-demand basis. The spot transactions were also average in the domestic Market. Furthermore, the European Central Bank (ECB) will continue to evaluate its decisions on a meeting-to-meeting basis to manage high inflation effectively. Moreover, in terms of domestic production, the manufacturing firms were operated at reduced rates as demand from the downstream industries was not fully recovered in the domestic Market. In addition, the ifo business climate index dropped from 87.4 points in July to 85.7 in August.

As per the market sources, Chemical imports and exports declined in the European Market, but the trade balance for the sector grew in January- July year-on-year. In addition, overall exports for the EU between January and July totaled €1.492bn, an increase of 2.9% compared to the same period a year prior, despite the 3.2% monthly decline, as July exports declined to €205.2bn from €211.9bn. Meanwhile, imports dropped 11.4% in the first seven months of 2023 to €1,502.2bn, spurred on by the 21.5% monthly decline to €200.3bn from July 2022's level of €255.3bn and a similar trend is anticipated to observe in upcoming months amidst weak downstream demand.

According to ChemAnalsyt, prices of Ethylene are likely to rise in the upcoming weeks due to further expectations of a rise in upstream prices. The availability of Ethylene is anticipated to be inadequate amid low production levels, pressuring the supply-side concerns. However, demand for Ethylene from the downstream industries might remain on the lower end ahead of firm inflationary pressure and high interest rates.