Over the few weeks leading up to both mid-July, ethylene prices skyrocketed in the U.S. supported by solid demand for exports, unplanned logistical issues, and continued cracker operations with LDPE benefitting from food packaging demand. As much as feasible, the feedstock supply remained steady, but maintenance and logistics in transport made availability tighter. Meanwhile, in Germany, the market remained stable although LDPE and LLDPE had slight upward moves mainly from demand while HDPE was weaker. Port congestion and stable domestic production kept the market steady. In the U.S., while the logistical issues remain, and Asian demand may persist, ethylene prices may remain high. Germany is set up for some slight upward pressure towards higher prices due to port delays, but otherwise, a reasonably balanced market with weaker HDPE demand.
Ethylene prices in the U.S. and Germany behaved differently from the latter half of July, due to a combination of regional supply levels, logistics delays and differences in downstream demand.
In the U.S., ethylene prices moved up from a strong domestic demand and export-driven interest for three straight weeks, but without the export drops seen in other countries or regions. Ethylene prices were stable in the week ending July 18 however, feedstock naphtha costs increased 3.3% in the middle of the week. In terms of domestic supply, feedstock remained steady as U.S. cracker operations were producing at higher rates, resulting in enough material for domestic demand and exports. Pharmaceutical and other varnish and trace chemical exports held steady from Asia (e.g., China and Indonesia) supporting demand to some extent, but domestic polyethylene demand remained mixed: HDPE and LLDPE prices were flat, and the LDPE prices rose on improved offtake in the packaging sector.
The bullish environment escalated by July 25, when ethylene spot prices skyrocketed higher. While feedstock naphtha prices fell slightly by 2%, various factors such as scheduled maintenance to some crackers, rail issues limiting the transportation of products, and port delays made spot cargo difficult to obtain due to available supplies. Even though the Gulf Coast crackers were running at high-capacity levels, logistics constraints limited available inventory. Overall, downstream sector prices for HDPE and LDPE fell while prices for LLDPE were stable reflecting fairly cautious sentiment for domestically produced polyethylene, while international demand continued to be good, especially in Asia.
At the same time, German Ethylene market showed more moderate movement. Though domestic spot prices retreated on weak domestic spot activity in week ending July 18, even with stable naphtha input costs, downstream demand trends were mixed: LDPE and LLDPE grades increased slightly due to end-uses in film and packaging applications while HDPE grades softened amid weaker uptake in rigid packaging and piping sectors.
In week ending July 25, ethylene prices were unchanged, a continued sign of supply-demand equilibrium. Domestic self-sufficiency levels meet 88% of the domestic demands. Port congestion in Hamburg contributed to increased logistics turnaround times in the port. Ongoing stable feedstock operating trends and steady orders across polyethylene and ethylene oxide derivatives were contributors to the stability of the ethylene market.
Looking ahead, In the USA, ethylene prices are expected to stay strong in the near term due to ongoing logistical issues, maintenance planned, and strong export demand from Asia. While domestic production is robust, we expect rail and port delays to continue to be a bottleneck for spot cargo availability, impacting supply. This, coupled with firm LDPE demand in packaging, may keep prices on a bullish trajectory, albeit with potential moderation if global polyethylene demand weakens further. In Germany ethylene prices may be under slight upward pressure due to delays at ports and stable domestic demand. Balanced availability, stable cracker operating levels, and weak HDPE demand may lead to a little upward ethylene price pressure or movement.
