High Upstream Costs Raise the Prices of Ethylene Oxide in the US and Asian Markets

Ethylene Oxide prices have inched higher in the US and Asian markets towards the end of August 2023 on account of a rise in upstream values. Demand from the downstream industries has remained moderate in the regional market. The downstream procurements were mainly based on a need-on-demand basis, reported by market participants. Furthermore, the tropical storm Hilary will impact the industrial and logistics activities in the US market.

According to ChemAnalyst's latest database, Ethylene Oxide prices have increased by 1.2% in the Chinese market. The cost pressure from feedstock Ethylene, followed by Naphtha, remained sufficient as its prices settled on the higher side, supporting the Ethylene Oxide prices to follow an uptrend in the domestic market. Furthermore, market players reported that Ethylene Oxide manufacturers operated at a relatively low rate, with some firms conducting equipment maintenance. Some production facilities shifted to producing Ethylene glycol or adjusted their usage ratios to ease production and sales pressures. In aggregate, the Ethylene Oxide plant experienced frequent malfunctions, resulting in a restricted market supply. However, the inquiries from the downstream Ethoxylates have remained moderate and were mainly based on immediate requirements. Furthermore, the recovery of the world's second-largest economy, China, has slowed down due to worsening property markets and sluggish consumer spending. Lately, China's central bank lowered key policy rates for the second time in three months, prompted by slower growth in industrial output and retail sales during July. Therefore, prices of Ethylene Oxide in Shanghai were settled at USD 870/MT during the week ending 25 August 2023.

Although a major manufacturer of Ethylene Oxide, China Petroleum, and Chemical, commonly known as Sinopec, reported net profit in the first half dropped over 19% on the year. The decline in sales was majorly attributed to weak demand for Chemicals and certain refinery products, including Naphtha and Petroleum coke. Further, net profit for the ended June was 36.12 billion yuan ($ 4.95 billion) while revenue declined 1.1% on year to CNY 1.59 trillion. Moreover, Sinopec expects China's economy to improve in the second half. Demand for refined oil products is anticipated to pick up, and gradual recovery is expected for Natural gas and Chemical products.

Similarly, in the US market, Ethylene Oxide prices have risen by 1.6% due to high feedstock Ethylene prices. The demand of Ethylene Oxide from downstream Monoethylene glycol and Ethoxylates has remained steady in the domestic market. Market participants reported that the supply of Ethylene Oxide has already been disrupted following the recent deflagration at Dow's Plaquemine, Louisiana. The US market has been battered by the consequences of Hurricane Hilary, which might further impact the production of several commodities, including Ethylene Oxide and logistics activities. This disruption will particularly have repercussions for Long Beach and Los Angeles ports. The storm, classified as a potent Category 4, made its way along Mexico's Pacific coast, posing a significant threat of heavy rainfall to the landslide-prone border city of Tijuana before advancing into Southern California.

Conversely, the US National Hurricane Centre reported another tropical Idalia, strengthened in the Gulf of Mexico as it bore down on Florida, bringing flooding rain to Cuba, Mexico, and the southeastern US. Furthermore, Idalia is expected to stay in the eastern Gulf, away from offshore oil and Natural gas production. However, it may affect agriculture across the South, as well as bring widespread power outages and snarl the supply chain.

As per ChemAnalyst, Ethylene Oxide prices is anticipated to increase in the US and Asian market on account of high upstream values. Furthermore, the influence of Hurricanes or storms on port activities, supply chain disruptions, port closures, labor shortages, and shipping delays might lead to supply shortages of Ethylene Oxide in the US market.