US Linear Alpha Olefin Prices Surge in August 2024, Bullishness to Extend into September

Linear Alpha Olefin (LAO) C10 prices moved up by USD 70/MT during August 2024 in the US market owing to the rising feedstock ethylene. The enquiries with market participants revealed intermediate markets showed increased procurement including LAO C10 detergent based grade. The spot prices of ethylene moved up by 12% over 31^st July assessed prices, adding significant high pressure for US bound LAO. In US domestic market, higher production of LAO and subsequent Linear Alkyl Benzene in the downstream persisted leading to fall in downstream prices due to high unsold inventories. Freight charges remained on the higher end due to improvement in traffic across Panama Canal as more water aided more travel. Domestic consumption in US moderated this month as Business confidence and US purchasing manager index dropped.

LAO C10 supply in US remained tightened due to drop in ethylene inventories and lower production due to outages in Texas due to tropical storms and heavy rains. Lower stocks coupled with outages and higher ethylene prices drove LAO prices upwards. With refinery operations gradually improving in the month hitting 93% in the last week of August easing supply pressures on ethylene. The decline in new orders led to a decrease in demand for materials, resulting in shorter delivery times from suppliers. However, the cost of materials increased at the fastest rate in 16 months, leading to higher prices for finished products.

Demand side factors for LAO C10 remained low from US based detergent and surfactant producers. Conversions from LAO C10 to Linear Alkyl Benzene and other derivatives eased this month owing to slowdown in demand as labor challenges persisted. Furthermore, port strike fears and Canadian rail strikes left major petrochemical producers to ease production this month, further lowering demand side factors in USA. The U.S. manufacturing sector experienced a decline in August. This marks the second consecutive month low, indicating a weakening economy. Production of LAO decreased due to falling sales and reduced demand. New business orders also declined for the second month in a row, with clients hesitant to commit to new projects amidst a slowing market. Inflationary pressures further impacted on new business. Export orders also decreased, influenced by geopolitical factors. Overall, the report paints a picture of a deteriorating manufacturing sector in the United States. Downstream Linear Alkyl Benzene prices dropped this month aided by lower consumption amidst increased interest rates. 

ChemAnalyst forecast for bullish LAO C10 as well as C12-14 grade prices for September and October to persist as temporary supply outages to couple with higher readiness for transpacific and transatlantic trade season going active before the Fall weakness hit LAO as well as detergent and surfactant markets.