European Ethylene Oxide Prices Remain Under the Shadow of Weaker Cost and Demand

Hamburg (Germany): The European Ethylene Oxide market has experienced a two-month decline amid a double whammy of lower costs and poor demand. Heading into the last quarter of 2023, these bearish factors continue to drive the Ethylene Oxide market downhill across the regional market.

According to ChemAnalyst's latest database, Ethylene Oxide prices in the German market have decreased by USD 18/MT during the second consecutive week of December 2023. The feedstock ethylene prices have also been observed on the lower side due to continued weak demand, resulting in the low manufacturing cost of Ethylene Oxide. This has supported the downtrend in Ethylene Oxide prices across the domestic market.

On the demand front, the pace of inquiries originating from the downstream Monoethylene glycol and ethoxylates industry has remained dull as the year-end approaches. The consumption of Monoethylene glycol and ethoxylates in the end-user sectors, notably PET and surfactants, has remained subdued amid tepid market conditions, leading to bearish market sentiments for Ethylene Oxide among manufacturers. Additionally, several market players report that spot transactions of Ethylene Oxide were flat as the enthusiasm of terminal firms to enter the market was not strong. As a result, the prices of Ethylene Oxide FD Hamburg were settled at USD 1467/MT during the week ending 8th December 2023.

In terms of domestic production, manufacturing firms were operating at low rates (i.e., 60-70%) as demand from the downstream industry had not fully recovered in the domestic market. Additionally, the German Manufacturing Purchasing Manager Index remained in the contraction zone, reflecting a deterioration in new orders. Despite the low operating rates, the material availability was abundant in the domestic market. Moreover, a major producer of Ethylene Oxide, BASF in Antwerp, resumed its Ethylene Oxide plant in late November 2023. Similarly, Ethylene Oxide production at BASF’s Ludwigshafen site also restarted after a technical failure in November, further improving the supply of Ethylene Oxide within the domestic market.

On the other side, following the acquisition of Eastman's Texas City plant for $500 million on December 8, 2023, INEOS took over LyondellBasell's Ethylene Oxide business and the production plant in Bayport, Texas, at a cost of approximately $700 million. INEOS’s decision to purchase LyondellBasell's Ethylene Oxide and derivatives business will provide the UK-based company with an opportunity to mitigate the negative margins that have hit European ethylene glycol producers via global assist optimization when faced with an insurmountable combination of weak consumer demand, volatile oil prices, and stiff competition from cheaper feedstock producers in the US and the Middle East.

Looking ahead, ChemAnalyst expects that European Ethylene Oxide prices might further decrease as manufacturers destock the material available in the regional market. The demand from the downstream industry is not likely to improve in the backdrop of off-seasonal demand. The feedstock ethylene prices are anticipated to decrease, which might ease the manufacturing cost of Ethylene Oxide.