Asia’s Linear Alpha Olefins price to stabilize by the second half of April

Linear Alpha Olefins prices have been continuously gaining in the last couple of months owing to strong crude oil prices and firm demand in the Asian market. Linear Alpha Olefins (LAO) or Normal Alpha Olefins (NAO) are highly versatile alkenes that are widely used in lubricants, surfactants, plasticizers, and other key industries.

Crude oil prices have been volatile since the beginning of the first quarter where tensions in West Asia provided an impetus to the crude values in the first half which was later exacerbated by the Russia-Ukraine war in February and March. Sudden rise in crude oil prices has put the undue pressure on downstream Naphtha and Raffinate values which culminated in strong prices for crude oil derivatives. Consequently, LAOs have also witnessed strong prices throughout the quarter. 1-Hexene, a Linear Alpha Olefin, witnessed a hike in its price and was assessed at USD 3465 per MT in Middle East Asia.

However, it has been expected that the Linear Alpha Olefin market may observe stability in the later stages of April 2022 as crude oil prices have stabilized globally hovering between USD 100-105/b. Stability in the crude oil prices is expected to provide required steadiness to Naphtha and Raffinate prices which will, in turn, normalize the prices of downstream derivatives. Hence, LAO production will witness ease in production costs which will deter any further price spike while stable demand dynamics will result in ease in the inflationary pressure over LAO. Demand fundamentals are unlikely to witness any stark change in the consumption offtakes from downstream surfactants and other industries in Q2.

China has been a key importer of LAO from the Middle East region and the recent resurgence of covid cases has deteriorated demand dynamics while substantially curtailing supply activities. Shanghai, a financial hub, has been amidst a citywide lockdown which has severely curtailed the trucking activities in the region. The demand from downstream industries has also declined as restrictions have resulted in declined consumption rates. This will further release the inflationary pressure on the imports of LAO in China.

As per ChemAnalyst, “Linear Alpha olefin market is likely to remain stable to firm till mid-April on the back of stable cost pressure and supply constraints emanating from lockdown in key cities of China. While the port of Shanghai has remained open despite city-wide lockdown, the transportation has been severely hampered delaying material delivery. The supply activities will increase towards 2^nd half of the month culminating in normalcy in the market dynamics which will likely ease pricing sentiment.”