What Factors lead Ethylene Market to Leave September on a Softer Note in the US and Europe

Hamburg, (Germany): The US and European olefins market stuttered under a weaker sentiment, unable to maintain the gains achieved over the past few weeks. Indeed, initial hike attempts failed to pass on Ethylene deals amidst subdued demand and lower costs. Overall demand fundamentals have been weak with market sentiment not rallying along the expected lines. With advance purchases already concluded in early September and with turnarounds at crackers and refineries, many assumed price levels had hit the floor. Spot activity remained mostly subdued, as buyers opted for purchases that met their immediate needs.

After experiencing the bullish rally in the prior weeks, Ethylene spot prices have inched lower in the German market during the last week of September 2024 amid a generally bearish market sentiment. The feedstock Naphtha prices have decreased which eased the overall production cost of Ethylene which weighed down the prices of Ethylene in the domestic market. On the other hand, oil markets have continued their rollercoaster ride, with oil prices declining as traders continue weighing on China’s latest stimulus package. The decline in oil prices has further put additional pressure on the prices of Ethylene in the domestic market.

In addition, the domestic demand for Ethylene from the downstream derivative, notably Polyethylene industry has continued to remain sluggish even after the holidays. Few markets player reported that the consumption from the key end-user plastic and packaging sectors have not improved yet. Also, inquiries from the other segments including Ethylene oxide have also been observed on the lower end amidst tepid buying sentiments among the end-users which dragged the prices of Ethylene across the domestic market.

Furthermore, the supply was enough as market players had already restocked the inventories in the domestic market. Moreover, cheap import offers from the Asian market has further supported the current price trend of Ethylene. Benchmarks for global sea freight rates has been falling sharply amid weak demand of freight containers. Thus, prices of Ethylene FD Hamburg were settled at USD 995/MT with a weekly decrement of USD 35/MT during the week ending 27th September.

Similarly, Ethylene prices have also been observed on the bearish note in the US market during the same time frame. In addition, the demand from the downstream Polyethylene and Ethylene oxide has been average with limited instance of new orders reported by market players which deteriorated the market fundamental of the product within the domestic market. At the same time, export demand for Ethylene particularly from the Latin America, and Mexico as well as from the Asian market has been low amidst sluggish downstream demand which further led to price reduction. Therefore, prices of Ethylene spot FOB US Gulf were offered at USD 730/MT with a week-on-week decrement of USD 50/MT on 27th September 2024.

Nonetheless, ports and railroads along the US East and Gulf coasts are gearing up for possible strikes by the International Longshoremen’s Association. Certain operations may come to a stop as early as September 30 at ports in New York, New Jersey, Virginia, as well as Houston, Texas, and New Orleans, Louisiana, if a new labor agreement is not reached. The strike is expected to cause the most challenges for products moved by container, including Ethylene.

In the short term, ChemAnalyst expects prices of Ethylene to decrease across the US and European markets as demand from the downstream derivative industry is not likely to improve until Q1 of 2025. The feedstock Naphtha prices are likely to decline following volatile crude oil futures which may further ease the production cost of Ethylene in the regional market. However, the supply of the product is anticipated to be tight due to low production rates and several producers may shut down their units amid the maintenance shutdown and other ongoing challenges in the global market.