Global Linear Alpha Olefin prices surge in March 2024 as manufacturing begins to recover
Global Linear Alpha Olefin prices surge in March 2024 as manufacturing begins to recover

Global Linear Alpha Olefin prices surge in March 2024 as manufacturing begins to recover

  • 09-Apr-2024 12:24 PM
  • Journalist: Patrick Knight

Texas (USA): Linear Alpha Olefin (LAO) prices showed signs of recovery in March as the global manufacturing situation began to turn around. This turnaround was led by a resurgence in Chinese manufacturing, as indicated by the second consecutive Caixin PMI score above 50, followed by positive trends in the US and Europe. Prices remained largely stable, while contracted prices continued to hold firm. Negotiations for new contracts for the second quarter of FY24-25 indicated prices to remain stronger on a year-over-year (YoY) basis. Geographically, Asian prices saw the highest surge YoY, followed by European and North American supplies. This was attributed to Asian reliance on American and Middle Eastern supplies rather than domestic capacities.

In Asian markets, first-quarter FY24-25 contracted prices to China through US suppliers were negotiated at USD 1470/MT for LAO deliveries and over USD 3200/MT for downstream PAO deliveries, marking a 12% increase YoY. LAO deliveries to Asia absorbed the high ethane cost and revised ethylene premiums offered at spot supplies. Contract prices in March leveled with spot prices as the supply chain situation remained challenged. The addition of new fleets for tankers and containers resulted in supply orders exceeding available volumes significantly, benefiting American LAO suppliers as Chinese and Singaporean importers placed higher orders. Freight charges for March showed mixed sentiments, with prices elevated in the first week gradually declining over the next three weeks, partly due to lower inventory stocking of other chemicals and products.

China’s demand for LAO C10 and subsequently PAO remained high, largely due to renewed manufacturing and expansion. LAO C10 spot prices throughout February and March 2024 showed stability with a gradual upward revision of 5% monthly. Additional price surges were primarily due to occasional outages and downturns in Chinese domestic supplies.

In European markets, newer contract negotiations saw significant discounts offered on LAO by American suppliers to German importers as domestic supply through the Netherlands came online in the first quarter of FY24-25. Market intelligence and internal investigations indicated 43% discounts on both LAO and downstream PAO supplies to attract European customers. Spot prices in European markets in March 2024 rivaled those in Chinese markets, indicating competitive pricing as European supplies recovered.

ChemAnalyst continues to monitor developments in global LAO markets. With upward revisions in ethylene feedstock prices coupled with ongoing supply challenges and rising crude prices, LAO prices are expected to remain elevated. The petrochemical supply crunch that began in FY23-24 is likely to continue into FY24-25, with stagnant production expected for LAO as major trade flows occur due to inventory movements.

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