Amidst Bleak Demand, Ethylene Prices Exhibit a Downtrend in the USA and European Market

Prices of Ethylene have continued their bearish rally in the US and European market during the first week of January 2023. Sluggish demand, high inflation, and economic downturn have been the primary factors that impacted Ethylene's market growth.

Prices of Ethylene have declined in the European market, backed by sufficient inventory and collapsing demand. The latest decline in the prices was attributed to the sharp decline in the freight charges resulting in the cheap imported material from the Asian market. Meanwhile, the domestic production cost has remained stagnant amid stable energy prices. Despite this, feedstock Naphtha prices increased this week but did not offer much cost pressure on the Ethylene. On the other hand, inflation in the eurozone dropped by 10.1% to 9.2% in December compared with the previous month.

Furthermore, demand from the downstream polyethylene and other competitive industries has remained on the weaker side amid the ongoing holiday season and the sluggish growth of key downstream industries, including packaging industries owing to off-season dullness. Most buyers take a side-line, and purchases are made on a just-in-need, on-demand basis. In addition, several Ethylene producers, including LyondellBasell, have lowered operational rates by 60-70% of production capacity to cope with weak demand fundamentals. Thus, in Germany, prices of Ethylene FD Hamburg were settled at USD815/MT with a weekly declination of around 1.2% on 6th January 2023.

Similarly, in the USA, ample material availability and sluggish demand resulted in the price drop of Ethylene in the domestic market. Meanwhile, demand from the international market has also remained on the weak side as Europe continues to face softer demand. According to the data, Purchasing Manufacturing Index (PMI) fell from 56.5 to 49.6 in December, signifying the contraction in both industrial and production activity. In conclusion, prices of Ethylene were settled at USD 415/MT with a week-on-week declination of 2.4% during the same time frame.

According to ChemAnalyst, "Ethylene prices will be expected to follow the downward trajectory in the USA and European market. On the demand side, the offtakes from the polyethylene and allied industries are expected to remain lackluster, especially in the Q1 of 2023 as macroeconomics headwinds, and pressure from Asian imports persists."