Global EDC Markets Navigate Turbulence Amid Cracker Closures and Logistics Challenges

During the week ending May 10th, Ethylene Dichloride (EDC) prices in Germany declined from USD 260/MT to USD 240/MT. The European market faced significant upheaval with the recent announcements of permanent cracker closures: SABIC decision to close its cracker at Geleen in the Netherlands and ExxonMobil's announcement regarding the closure of its cracker at Notre-Dame-de-Gravenchon, France. These closures contributed to a slightly loose the market balance in Europe for April. While some derivative shutdowns mitigated the impact of these closures, there were also notable investments and expansions in ethylene oxide, EDC, and polyethylene. Despite these efforts, there remained a net loss in Ethylene consumption, raising concerns about potential additional closures due to low demand. While the traditional North European hubs remained dominant, the emergence of the Port of Barcelona as a competitive player marked a notable shift in trade route dynamics, particularly for shipments between the Far East and the Americas. However, terminals in North Europe grappled with line-up congestions, attributed to adverse weather conditions, holiday-related port closures, and scheduling conflicts among services. Despite these hurdles, key ports like Bremerhaven and Rotterdam sustained efficient operations, maintaining healthy yard density. Downstream PVC producers attempted to align prices with 50% of the Ethylene contract price movement but encountered difficulties in raising prices, leading to squeezed margins. The persistent depression in the core construction markets of key European regions like Germany and France further dampened the overall demand for EDC. Moreover, the softening demand and prices for PVC, a significant derivative of EDC, were anticipated to trigger lower operating rates for chlorine production. This decline in operating rates could potentially lend some support to PVC prices as the summer season approached.

In the American market, EDC prices this week experienced a significant decline, plummeting by 2.8%. Producers were compelled to export to Asia, where prices were more competitive, further contributing to the downward pressure on prices. Demand for US EDC waned in regions such as the Arabian Peninsula and Southern Asia, where some regional capacity had resumed production. Additionally, European producers hesitated to purchase US EDC at higher prices, fearing potential impacts on their own product competitiveness. Stagnating demand for PVC in housing applications also influenced the EDC market dynamics in the US, reflecting ongoing weakness in the homebuilding sector. Logistical challenges at the Port of Baltimore exacerbated supply chain issues, impacting operations, and contributing to market disruptions. Despite initial disruptions, temporary solutions, including the utilization of barge services, were implemented to ensure continued connectivity and serviceability at the port where feasible. Furthermore, the Panama Canal's dry period led to the blockage of east-west passage in the Americas, resulting in a backlog of ships awaiting passage.

In the Asian market, EDC prices in South Korea saw a notable increase, rising by less than 0.5% and maintaining an upward trend. This upward movement in EDC prices could be attributed to several factors, including a rise in the market trading fundamentals and a depreciation of the Korean Won against the US dollar. Import prices in South Korea had been on the rise for the fourth consecutive month in April, driven by these factors. Import prices played a significant role in determining the country's overall rate of inflation. South Korea's import dynamics were also influenced by shifts in crude oil sourcing. The country reduced imports of Saudi Arabian crude and increased shipments of US cargoes due to more favourable feedstock trading economics for American barrels. This decision was prompted by rising Persian Gulf-Asia tanker insurance costs amid geopolitical tensions in the Middle East, contributing to the slight incline in EDC prices. Market faced a situation of low supply, marked by a scarcity of essential resources. The challenges around the Port of Baltimore continued to present logistical hurdles, leading to an increase in upstream market and subsequently higher production costs for ethylene. This, in turn, resulted in elevated prices for EDC, impacting the overall market dynamics. In response to the port incident, temporary channels such as barge services were implemented to maintain operations where feasible. However, there remained uncertainty regarding the timeline for the full reopening of the port and the resumption of regular bookings.

According to ChemAnalyst, EDC prices are projected to experience an uptick in the coming weeks. An anticipated increase in crude oil prices, driven by ongoing geopolitical disputes, is expected to impact the cost structure of EDC production. In May, the anticipated increase in ethylene costs, a key raw material for EDC, is set to escalate pricing pressures. Producers are expected to continue operating at reduced rates, potentially leading to a tighter supply landscape. Moreover, the ongoing routine maintenance of several Polyvinyl Chloride (PVC) facilities will exacerbate the scarcity of EDC in the market.