Linear Alpha Olefin Prices Turn Bullish in January 2024 Amidst Better Buying

Antwerp (Belgium): Linear Alpha Olefin (LAO) prices turned bullish in January after inventory pressure eased, coupled with improved consumer sentiments following Christmas retailing worldwide showing signs of rising private consumption. Globally, feedstock ethylene prices deflated owing to strong US crude and gas production, coupled with slower Chinese polyethylene and other petrochemical demand, resulting in lower material costs for major LAO suppliers. European markets observed a strong rise in prices as temperatures fell in Northern Europe, restricting supply due to paralyzed Riverine logistics. On the other hand, North American markets observed a marginal fall in prices amidst oversupply, despite recovering demand as plants like ExxonMobil remained online, oversupplying the market. LAO prices elevated globally due to supply disruptions in the Red Sea and increased safety stocking up.

In European markets, prices remained elevated with buyers receiving orders around $1450/mt FD Antwerp. Supply to European markets remained largely imported, and the price rise in the given month is largely attributed to safety stocking. Furthermore, inventory pressures for LAO from downstream industrial markets increased as major plants remained offline in Europe due to trimming of crackers, sustainable transitioning, and maintenance downturns. Internal European supply remained stuck, especially in Germany, partially due to weather situations and Hamburg rail strikes, significantly affecting the Netherlands. Domestic demand remained subdued in Northern Europe, while France, UK, and Italy observed strong improving consumer demand in January amidst the Winter shopping spree as temperatures began to fall after a largely warm December. Demand for LAO from downstream lubricants and surfactants showed improvement in the middle supply chain, partially due to inventory pressure transferred from the previous months and partially due to improvement in consumer sentiments. Competitive pricing and product mix offered by American markets with American supplies dominating the European markets, as FOB Louisiana pricing showed a $400/mt differential with FOB Al Jubail supplies. Freight prices skyrocketed by 400% on the Asian-Northern European routes due to the Suez Crisis, coupled with safety stocking of LAO from European markets from American and Saudi suppliers. Saudi Suppliers are seeing input price pressure as upstream ethane prices rise, which is expected to further reflect in the prices of LAO in February.

In Asian markets, LAO prices remained elevated largely owing to import dependence as freight charges remained high, coupled with safety stocking up. Downstream lubrication and surfactant demand remained relatively stable but elevated compared to January 2023, owing to recovery in manufacturing and transportation as energy prices significantly deflated with recovery in the domestic markets. Downstream Polyalphaolefins prices remained stable in the given timeframe as inventory pressure eased with higher downturns in the given timeframe, as a strong winter season affected Asian markets. LAO markets saw recovery largely owing to feedstock inventory pressure as East Asian markets restocked due to Lunar New Year festivities in February, with prices expected to stabilize as trading activities shut down.

ChemAnalyst Research Analysts argue that oversupply in the LAO market will be observed once safety restocking settles as the Red Sea crisis fizzles out and the global credit environment continues to remain tight to control imported inflation. But LAO prices are expected to rise until April as the supply chain remains tight.