European Linear Alpha Olefin Prices Show Bearish Trend, While US and Asian Markets Show Promise

Recently, LyondellBasell released the statement for the Q3 FY23 results, highlighting the financial performances. Linear Alpha Olefins continued to show weak performance in the third quarter despite cooling off inflation and reduced operating costs, implying weaker demand than anticipated across the globe. Lyondell Olefins & Polyolefins showed a lower EBITDA Q-o-Q basis in FY23.

Prices of Linear Alpha Olefins remained largely weaker compared to the previous quarter across North American markets. Linear Alpha Olefin's prices showed a recovery due to rising crude and gas prices in the latter half of Q3FY23. The US remained competitive due to the high oil/gas feedstock ratio, which provided relatively stable pricing compared to the high gas-dependent economies of Europe. Demand continues to remain weak across the globe, with signs of positive sentiments from China and the USA, which uplifted the global Linear Alpha Olefin prices in the given quarter. The US continues to add more capacities in the Linear Alpha Olefins market, with the Baytown plant adding to a total of 650,000 tons/year of 1-Hexene in the market. LyondellBasell officials asserted that rising capacities and weak demand are expected to hit the prices further in H1 2024 in the USA since demand continues to be weaker than the incremental supply observed.

An official from LyondellBasell stated that the sales volume and prices of Linear Alpha Olefins were comparatively weaker across all regions. Inflated input cost commensurate with weak demand continues to persist in the Eurozone. Energy prices cooled off significantly while the prices continued to remain inflated as the value chain was unable to destock costlier goods in the European market due to weak demand. Prices and sales volume have dropped in Europe in Q3FY23 on a Q-o-Q basis despite energy prices cooling down by 77% Y-o-Y basis in August 2023. Linear Alpha Olefins prices continue to stay inflated viz-a-viz American and Asian counterparts. Downstream Polyethylene and Polypropylene markets continue to face headwinds in Europe as the construction and consumer section continues to stay down. Major demand for Linear Alpha Olefins derived lubrication, polymers, etc., continues to be generated from automobile industries, especially EV.

Prices of Linear Alpha Olefins and its sale volume showed marginal improvement in the region of Asia Pacific especially driven by the boost the Chinese economy received through government stimulus in Q3FY23. The Chinese economy continues to see a rising consumption of Linear Alpha olefins, especially from North America, as downstream PP and PE demand from passenger vehicles, the construction sector, etc., showed a positive movement. An official commented that LyondellBasell Bora, a China joint Venture, continues to operate at lower rates. Demand remains way below the new capacities and supply added to the market. Even with lower operating margins, Lyondell remains optimistic about strong sales volume in Q4FY23, regardless of seasonal factors.

Prices of Linear Alpha Olefins continue to be largely dominated by the US prices across the global markets as major European suppliers continue to run at lower rates. Downstream sales volumes of PE and PP are expected to dictate the pricing trend of Linear Alpha Olefins to a significant extent. ChemAnalyst's analysts continue to expect a bullish sentiment in Q4FY23 as geopolitical tensions and the expectation of a harsher winter in Europe are going to provide a cost on the input side significantly.