Global 1-Hexene Prices to Remain Subdued in Q1 FY24 Amidst Oversupply Concern

Texas (USA): 1-Hexene prices are expected to remain subdued in the upcoming quarter of FY24 due to prevailing oversupply sentiments in the global polyethylene markets. Global recovery in the chemical segments is anticipated to commence by FY25, as reported by CEFIC. This analysis is supported by fourth-quarter data from various regions, indicating oversupply in polyethylene markets worldwide, leading to subdued prices due to negative demand pressures. 1-Hexene prices persist around 10% above pre-pandemic levels following significant deflation observed in FY23.

In North American markets, 1-Hexene prices have returned to pre-pandemic levels amidst significant negative demand pressures, largely due to high interest rates and subdued construction and consumer sentiments. Construction demand for 1-Hexene/ethylene polyethylene segments has drastically fallen due to high builder costs, labor market tightening, and lower demand from homebuyers. Despite a slight uptick in 1-Hexene supply to the construction market in December, oversupply is observed, mainly due to a further fall in demand attributed to seasonality and higher winter temperatures. Consumers remain resilient in transitioning to a 1-Hexene/ethylene-based heating system. The Inflation Reductions Act 2022 had limited success in sustainable consumer transitioning in FY23 due to high maintenance costs amidst elevated interest rates. 1-Hexene demand from automobile verticals is also slowing down with EV transition facing challenges, including affordability issues and an increase in consumer electricity charges in January. Tesla and Japanese automakers like Toyota have recalled a large chunk of their EVs due to rising technological challenges in autopilots.

In European markets, 1-Hexene prices continue to remain inflated primarily due to import dependence from the Middle East and crude oil volatility. European markets face 40% higher prices for 1-Hexene than their American counterparts. The high import prices, along with a subdued construction sector and falling demand from the EV vertical, pose significant challenges for the recovery of 1-Hexene prices in Europe. The construction sector is expected to slow down further in Europe, as major Eurozone nations cut down public schemes like the Italian "super bonus" on transitioning to sustainable energy due to high financial deficits and lowering inflation. Overall demand sentiment for the construction sector is poised to slow down further from Q2 FY24 when newer orders for 1-Hexene are anticipated to decline amidst global tightening of 1-Hexene supply, especially through the Suez route. Similarly, prices of 1-Hexene remain subdued in Asian markets mainly due to high interest rates, a sluggish real estate and construction sector, and fallen manufacturing causing a slump in demand. Japanese and Korean markets have largely been driving 1-Hexene markets through their automobile exports, which are showing signs of fatigue as the EV market slows down in Europe and America due to financial sustainability.

ChemAnalyst's internal study has revealed that Chinese new polyethylene capacities, coupled with current global operating rates of 80%, may lead to a balance in 1-Hexene and polyethylene demand and supply by FY2025, as agreed by CEFIC for European markets. Similar trends are being observed in APAC. FY24 is anticipated to see a recovery in 1-Hexene prices in North American markets by H2FY24.