Amid Escalated Feedstock Prices and Limited Supplies, Ethylene Prices Edge Higher Europe

Hamburg (Germany): Ethylene prices have remained firm across the European market during the second consecutive week of March 2024, buoyed by high upstream costs and logistics snarls that have curtailed import material flow. However, market players have cited poor demand as a counterbalance to the firmer production costs. The demand recovery in the regional market has been slow thus far, creating a subdued trading atmosphere. Market participants are hopeful that buying appetite will improve in March and April as the high season approaches. Looking ahead, players expect Ethylene prices to follow a similar trend to what is seen in the upstream markets.

Prices of Ethylene have persistently increased in the German market. The cost support from feedstock Naphtha prices was sufficient for Ethylene, as its prices settled on the higher end in the domestic market. On the input energy front, crude oil prices have strengthened over the past few weeks following a string of drone attacks by Ukraine on Russian refineries, sparking concerns about fuel supply security. The rise in crude oil prices has further increased the overall production cost of Ethylene in the domestic market. Furthermore, the Energy Information Administration expects that the tighter oil market balance this year will keep Brent crude oil prices above current levels before increasing inventories as a result of OPEC+ rolling back its production cuts at the end of the year, which will start to put downward pressure on the price next year.

Additionally, operating rates have remained under pressure, leading to limited Ethylene availability within the domestic market. Furthermore, Germany's manufacturing Purchasing Managers' Index was revised slightly higher from 42.3 in January 2024 to 42.5 in February 2024. However, the reading continued to indicate a deep contraction in the manufacturing sector, with production falling the most since October 2023, due to a deeper downturn in demand. Meanwhile, market participants also pointed to continuing supply constraints amid ongoing turmoil in the Red Sea and delays in arrivals of import material from the Middle East and Asian markets as key factors responsible for pushing Ethylene prices higher.

On the demand side, inquiries from the downstream Polyethylene industry have remained average within the domestic market as consumption from the packaging and plastic industry has slowed amid macroeconomic headwinds.  Nonetheless, it was insufficient to drive the price realization of Ethylene. As a result, prices of Ethylene FD Hamburg were settled at USD 960/MT with a week-on-week increment of USD 50/MT during the week ending 8th March.

According to ChemAnalyst, over the near term, Ethylene prices are likely to remain firm across the regional market amidst restrained supplies and higher feedstock costs. Additionally, demand from the downstream industry might start to recover in the coming weeks.