European Ethylene Oxide Prices Face Decline Trend Amidst Downstream Market Uncertainty

Moving into the last week of October 2023, Ethylene Oxide prices have drifted lower across the European market on account of weak raw material prices. The major economies of Europe have been significantly slower this year amid persistent inflationary pressures, weak consumer sentiments, and volatile energy prices, which exacerbated the Ethylene Oxide market concerns on wider levels. Furthermore, Germany's latest manufacturing Purchasing Manager Index figures showed continued deterioration. Slow economic data weighs on the outlook, with lower-than-usual consumption in all downstream segments.

Ethylene Oxide prices have declined by USD 25/MT in the German market during the last week of October 2023. The earlier rally in the crude oil markets has had a limited impact on upstream spot naphtha prices so far, which still indicated monthly drops, and consequently, the decline in feedstock Ethylene prices has culminated in the decreased cost support for Ethylene Oxide in the domestic market. Furthermore, market players reported that manufacturing firms were operating at reduced rates amid weak downstream demand. The availability of finished stock of Ethylene Oxide was sufficient to cater to overall downstream demand. Moreover, the manufacturer of Ethylene Oxide Sasol, Marl Germany, having a production capacity of 215,000 MT/ year, has shut down the Ethylene Oxide plant amid maintenance turnaround; it had a minimal effect on the supply of Ethylene Oxide.

In addition, the European Central Bank kept its key rates unchanged due to fears about a potential recession in the Eurozone. The ECB had increased interest rates multiple times to reduce excessive inflation, which diminished to 4.3% in September from a peak of 10.6% last year, nevertheless remains above the ECB's 2% target. The high interest rates and persistent inflationary pressure have eroded the purchasing power of end-use industries of various commodities, including Ethylene Oxide. Meanwhile, the inquiries from the downstream derivative Ethoxylates and Monoethylene Glycol industry have remained lackluster amid sluggish buying sentiments in the domestic market, which weighed down the prices of Ethylene Oxide. The spot market transactions were also average as buyers were waiting for the right moment to enter the market and had no plans to build up material ahead of the year-end. As a result, Ethylene Oxide FD Hamburg prices were settled at USD 1515/MT on 27 October 2023.

Furthermore, a major producer of Ethylene Oxide, BASF, mapped out further cost cuts and scaled back investment spending; earnings and sales were at the lower end of its target ranges due to an uncertain global outlook. The third quarter income dropped by 57%, and the quarterly Earnings Before Interest And Taxes (EBIT), adjusted for one-offs, decreased to 575 million euros ($609 million), weighed down mainly by lower prices and sales volume of basic petrochemicals.

According to ChemAnalyst, prices of Ethylene Oxide might decline further in the European market in the wake of a decline in feedstock prices. Furthermore, demand from the downstream industry is not likely to recover until the first half of Q4 amid rampant inflation.