Ethylene Prices Weaken in the European Market as Limited Demand Outweigh the Cost

Germany, (Hamburg): After experiencing firm pricing over the past few weeks, Ethylene prices were poised to end March on a softer note across the European market, despite high upstream and energy prices. Market reports indicate persistently subdued market fundamentals amidst geopolitical risks and dwindling end-sales, which kept price hikes in check as discounts were applied to deals. Market participants expect softer Ethylene prices in the upcoming weeks, citing a weak demand outlook and potential relief in supply.

According to the latest data from ChemAnalyst, Ethylene prices have significantly declined in the German market, with buyers remaining on the sidelines amid muted derivative orders. Demand for Ethylene from the downstream Polyethylene industry has remained average within the domestic market, as consumption from end-user packaging and the plastic industry has slowed down towards the end of March 2024. Consumers are expressing readiness to wait for the arrival of import cargoes in April 2024. Moreover, spot market activities remained limited due to a lack of strong interest from terminal firms to participate, resulting in a pessimistic market outlook for Ethylene manufacturers.

On the other hand, global crude oil prices rose more than USD 1/barrel as OPEC+ stayed the course on production cuts. Ongoing attacks on Russia’s energy infrastructure, coupled with a falling US rig count, tightened crude supply, while feedstock Naphtha prices persistently increased amid tight supply and improved demand from other sectors. However, this increase was currently insufficient to drive Ethylene price realization higher in the domestic market. Tepid downstream demand has caused manufacturers to trim their price hike goals.

Meanwhile, market players report that supply concerns have diminished, as healthy netbacks and a downward correction in freight charges, despite unrest in the Red Seas, have attracted irregular Asian and US offers to Germany. According to Drewry, the latest freight charges from Shanghai to Rotterdam and Shanghai to Genoa dwindled 2% to USD 3,159 and USD 3,806 per 40ft box, respectively, on March 28th, 2024. Additionally, Asian and US Ethylene supply aided the market this week, and consequently, buyers met their limited requirements, particularly for Polyethylene in the German domestic market. Thus, foreseeing average demand and improved supply, Ethylene prices in the domestic market have declined. As a result, prices of Ethylene FD Hamburg were settled at USD 870/MT, with a week-on-week decrement of USD 80/MT during the week ending March 29th, 2024.

Looking ahead, ChemAnalyst anticipates that European Ethylene prices are likely to decrease in the coming weeks due to further expectations of soft demand from the downstream Polyethylene industry. However, cost support might linger amid high feedstock Naphtha prices and a bullish forecast in the crude oil market for the upcoming term. Meanwhile, freight rates might recover; despite the steady decline over the past few weeks, long lead times might remain intact, but weak consumption from end-users might continue to curtail Ethylene demand.