Hurricane Hit Texas to Shift Global Prices Upwards for Linear Alpha Olefins In June, Demand to Remain Soft
Hurricane Hit Texas to Shift Global Prices Upwards for Linear Alpha Olefins In June, Demand to Remain Soft

Hurricane Hit Texas to Shift Global Prices Upwards for Linear Alpha Olefins In June, Demand to Remain Soft

  • 23-May-2024 1:26 PM
  • Journalist: Gabreilla Figueroa

Antwerp (Belgium): In April 2024, the Linear Alpha Olefin (LAO) market experienced significant price declines in both the FD Antwerp and FOB Al Jubail regions. The price of LAO FD Antwerp fell sharply by USD 100 per metric ton (MT), marking a 7% decrease. This substantial drop was primarily driven by increased feedstock availability and reduced electricity charges, which bolstered operations at the INEOS site in Antwerp. Concurrently, the FOB Al Jubail price dropped by USD 30/MT, a 2.5% decline, attributed to reduced procurement activities and downturns in base oil units in China. Despite heightened demand in the latter half of the month, aggressive bargaining by Chinese buyers and high ethylene inventories prevented a full price recovery. As May progresses, a hurricane hitting Texas further complicates the situation of global LAO markets.

The LAO supply situation in both regions remained relatively stable but faced distinct challenges. In Belgium, US suppliers gained a competitive edge due to increased tanker availability in the Atlantic, leading to substantial discounts and lower costs. Despite stable demand for detergents and surfactants, industrial segment slowdowns and higher freight charges affected the market. Meanwhile, in Saudi Arabia, Ramadan-induced production slowdowns and aggressive discounting to Chinese suppliers led to further price reductions. US markets remained strongly affected in the latter half of May 2024, with CPChem and ExxonMobil Chem operations in the Baytown area being hit, the largest LAO supplier to the globe. Ethane prices increased by 6%, ethylene prices by 4%, and subsequently hexene-1 and decene-1 prices by 6% and 7%, respectively, in the week ending on 15th May 2024. Global supply reduced by 10,720 tons, according to calculations by ChemAnalyst, leading to an aggregate price rise of 4.7% across LAO segments. Operating rates in the Middle East remained below 80%, with rising labor and operational expenses squeezing margins, yet the market remained profitable due to contract-based demand. This dynamic interplay of supply conditions and market demands in both regions underscores the complexity of the LAO market.

Looking ahead, the market sentiment for LAO remains bearish but shows signs of potential stabilization. In Saudi Arabia, prices are expected to rise modestly in the upcoming months, driven by geopolitical tensions, increased freight charges, and improved chemical margins. The Belgian market anticipates further price declines, with LAO FD Antwerp expected to decrease in the upcoming months, due to ongoing negative price pressure from crude and gas prices, increased US supply, and intensified competition. However, by the end of July, prices are expected to bottom out, with positive pressure anticipated from higher crude and gas demand and a reorientation of supply chains for new production cycles. Additionally, the FOB Texas price of LAO saw a modest rise, reflecting an increase in ethane prices and robust demand from China and India, suggesting a potentially stabilizing influence on the global LAO market. With the hurricane hit, ChemAnalyst's positive movements in the forecast are retained, with June deliveries observing higher price increments over May prices for US outbound deliveries to China and APAC.

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