Ethylene prices declined across the global market in the first week of May 2023 due to weak cost pressure from the feedstock prices, subdued demand, and stable inventories. Additionally, macroeconomic factors such as restrictive interest rates, tightening credit from the regional banking turmoil, and a volatile pricing environment for upstream products have a cumulative effect on the downshift observed in the price realization of Ethylene.

 

In the European market, Ethylene prices have gained a downtrend backed by sluggish offtakes from the downstream Polyethylene industries and stable supplies in the region. The economic uncertainties driven by rising interest rates by the European Central Bank (ECB) to tame high inflation, as well as a decrease in purchasing activities, have further weakened the market sentiments of Ethylene in the regional market. In addition, low feedstock Naphtha prices, followed by the continuous decline in crude oil prices, have proportionally impacted the production cost of Ethylene in the region. In contrast, the weak demand dynamics in the Asian region prompted Asian producers to send the material overseas. This has resulted in the stagnant material available on the European shores. Furthermore, market players reported that domestic production run rates were maintained at lower levels to match the inadequate demand. Thus, prices of Ethylene FD Hamburg were settled at USD 875/MT with a week-on-week decrement of USD 25/MT during the week ending May 5, 2023.

 

On the other side, the continual deterioration in demand sentiment coupled with ample material availability has resulted in decreasing prices of Ethylene in the USA market. The USA is the exporter of Ethylene in the world; however, sluggish demand dynamics in the overseas market have further prompted the market participants to maintain soft prices. In addition, Chevron Phillips Chemical in Sweeny, Texas, having a production capacity of 2,250 M Lbs/year, restarted its Ethylene unit in the last week of April. As a result, Ethylene FOB US Gulf prices were assessed at USD 500/MT on May 5, 2023.

 

Despite being a major producer and importer of Ethylene, China did not experience any price changes in the product in the past week. This can be attributed to the weak market conditions that have been worsened by the recent labor day holiday. The assessed prices of Ethylene CFR Shanghai remained at USD 900/MT. In addition, the demand for Ethylene from the downstream Polyethylene industries has been consistently low, and with ample inventory available in the domestic market, manufacturers have had no choice but to keep their prices flat.

 

On the other hand, ENEOS Corporation in Kawasaki, Japan having a capacity of 1,190 M Lbs /year, was forced to shut down its Ethylene unit due to seawater leakage from the piping. The unit is expected to start on May 13, 2023.

 

As per ChemAnalyst's anticipation, Ethylene prices will likely operate under pressure due to dull demand from the downstream Polyethylene and Glycol value chain industry across the regional market. Moreover, the possibility of an economic downturn in Europe, as a result of factors like spiraling inflation and high-interest rates, will likely persist in the near future.