Hamburg, (Germany): Ethylene prices have gained an upward momentum across the European market during the last week of July 2024 driven by supply disruption. A shift in the supply outlook was blamed for the changing sentiment, buoyed by regional production hiccups, disrupted import flow, and upcoming autumn turnarounds. Additionally, the rise in raw material costs has further pushed up the prices of Ethylene. Though, demand from the downstream derivative industry has remained average owing to a seasonal lull.

The gain in the German Ethylene spot prices ascended from supply pressures as depleted stockpiles promoted buyers to replenish material, with some pre-buying seen in July prior to the onset of the summer holiday season when downstream demand is typically average. Meanwhile, participants are reportedly exercising caution and making need-based purchases owing to a lack of clarity clouding market prospects in the short term. Although, overall, domestic demand for Ethylene from the downstream Polyethylene industry has continued to remain weak as consumption from the key end-user plastic and packaging sector was below seasonal expectations.

Additionally, the feedstock Naphtha prices have increased in the latest week followed by strong crude oil prices which raised the production cost of Ethylene in the domestic market, keeping the Ethylene prices elevated. Moreover, domestic producers of Ethylene have been running their plants at curtailed rates to calibrate their production with soft demand. At the same time, imports from the key Asian and Middle- Eastern have significantly declined owing to steep hikes in freight rates combined with protracted transit times amid the Red Sea crisis, resulting in a supply shortage in the German domestic market. Thus, prices of Ethylene FD Hamburg were settled at USD 860/MT with a week-on-week increment of 4.9% during the week ending 19th July.

Furthermore, several market players anticipated a potential tightening in the near-term considering force majeure at the domestic market and a dearth of imports from the overseas market in particular. Moreover, the major producer of Ethylene LyondellBasell plans a maintenance turnaround at its Wesseling site between August and September which might further lead to a short term supply instability in the domestic market.

Looking ahead, ChemAnalyst speculates prices of Ethylene are expected to remain firm in the European market. The supply of Ethylene is expected to be limited due to regional plant shutdown and low operating rates. Furthermore, imports from the Asian market might further reduce amid concern over the Red Sea crisis which may alleviate potential downward pressures and lead to a bullish pricing environment. However, demand for Ethylene from the downstream Polyethylene industry may remain tepid amidst summer holidays but it may slightly impact the prices of Ethylene.