Global Linear Alpha Olefin Prices Surge Amidst Supply Chain Disruptions and Rising Energy Costs

Linear Alpha Olefin (LAO) prices rose in August after continuously contracting for four months across the globe. LAO C10 blend FD Antwerp rose from USD 980/MT to USD 1020/MT, LAO C10 blend FOB Osaka rose from USD 1160/MT to USD 1240/MT, and similar price rises were observed in the other states. Rising crude prices due to OPEC+ production cuts began to affect the supply chain of olefins in the month of August. LAO are higher molecular blends of alkenes primarily used as surfactants, plasticizers, lubricants, and solvents.

In the European market, an increment in LAO prices is commensurate with a rise in ethylene and energy prices. Market participants revealed that demand from the downstream sectors of LAO remained stagnant due to the weak economic performance of the European economy. The rising cost of living and energy are pushing both the consumers and the producers on the edge. Quotations from multiple traders show a rise in both the contract as well as spot prices in Europe. Inventories of natural gas rose in Europe to 90 percent due to aggressive buying, which raised natural gas prices globally. From the supply side, ethylene prices in Europe significantly rose as Norway’s largest Troll field is under seasonal maintenance, leading to reduced production. European Commission officials reported that Europe’s aggressive purchase diverted a large supply of natural from Asian markets, which pushed up the prices of LAO in major Asian countries to a significant extent.

LAO prices in American markets, including the USA, showed a similar rising trend with a different degree due to inflation differential. Multiple inquiries revealed that demand from oil and gas industries showed improvement as drilling activities increased across the United States to counter the OPEC+ production cuts. It was also revealed that the inventories of LAO remained on the lower end, and the procurement activities resumed proactively. Rising energy and feedstock prices also contributed to the rising price of LAO, especially new orders in the upstream market. The US has increased the import activities of LAO from Europe rather than Asia due to rising freight charges across the Pacific. Demand from surfactant lubrication producers showed a marginal increase but not significantly as consumption remains subdued.

LAO prices in Asian markets rose primarily due to the supply diversion of natural gas toward Europe. Asia is one of the largest importers of crude and natural gas. Importers revealed that Russian oil in Chinese and Indian markets has now turned competitive to global crude prices as Russian discounts have been reduced, which is now being pushed down the value chain. The Energy and feedstock prices of LAO showed an increment due to this cost-push. Demand remained subdued in the Chinese market due to weak economic recovery contracting industrial activities, while it remained stable and marginally improved in surfactant and plasticizer industries in India, Japan, and South Korea. Despite the price rise, the supply side remained strong as procurement remained stable in the given month. Experts opine a temporary price rise of LAO in Asian markets due to Europe’s aggressive purchases of natural gas from the international market. An increase in the prices of LAO poses significant threats in Asian markets, especially India, as it leads to a rise in operating costs, pushing the producers to reduce production to cut costs.

ChemAnalyst’s database analysis reveals that LAO prices are expected to stay inflated for a significant period of time over pre-COVID levels, and the recovery of prices across the globe is expected in 2024. Feedstock and energy prices are expected to recover in the coming months, but the general economic activities are expected to face inflated inventory prices and older orders for a significantly larger duration, pushing the consumption factor suppressed.