Global Ethylene Dichloride Prices Tumble on Weak Crude Oil Support

With the week ending on 26th April, Ethylene Dichloride (EDC) prices fell as the crude oil market continued to experience downward pressure and global prices of ethylene slumped, contributing to the drop in EDC trading fundamentals. Additionally, demand from the downstream Poly Vinyl Chloride market also decreased, further impacted by a decline in the construction sector.

During the week ending on April 26, 2024, the EDC market in China saw a significant price decrease of 5.2%, dropping from USD 385/MT to USD 365/MT. This decline is part of an ongoing trend reflecting challenges in the upstream market, particularly affecting petrochemical operations. With bearish petrochemical margins, cracker facilities have reduced operational rates, which has restrained any significant increases in Naphtha prices, closely linked to EDC production. Additionally, easing geopolitical tensions in the Middle East and lowered expectations for escalated US sanctions on Iran's oil exports have mitigated some market uncertainties. In the downstream sector, particularly the PVC spot market, there was an absence of volatility last week. Ahead of the May Day holiday, trading activities remained moderately average with slow market offtakes. Manufacturer quotes have stayed relatively stable, setting a solid baseline for prices, while trader-offered prices have been more adaptable to current market conditions.

In Germany, the EDC market experienced a noticeable price drop during the same week, primarily influenced by a global decrease in crude oil prices, with the Brent benchmark declining. This drop occurred along with the stable ethylene prices, a key raw material for EDC, as demand from downstream industries remained low. Initially, PVC producers sought to raise prices in March, but persistent low demand aligned base PVC prices with the reduced ethylene reference price. Despite some stock-building in the construction sector, anticipated increases in spring demand have not materialized, keeping the sector sluggish. This has led converters to adopt a conservative purchasing approach, buying only essential materials in response to weak order books. This cautious behaviour underscores a market characterized by weak demand and sufficient supply, exerting ongoing downward pressure on EDC prices in Germany.

In Saudi Arabia, EDC prices also fell during the week ending on April 26, 2024. This decline mirrors a global downtrend and is further influenced by specific regional factors, such as a decrease in plastics demand linked to a downturn in the Saudi property sector. With less demand for EDC, crucial for PVC production used in construction, the market felt the impact. Additionally, falling crude oil prices have led to lower Naphtha costs, affecting petrochemical derivatives like EDC. Despite factors like OPEC cuts hinting at economic recovery, the anticipated demand increase has not yet materialized, and high inventory levels have exacerbated market conditions. As supply outstrips demand, suppliers are compelled to lower prices to encourage sales, reinforcing the overall bearish sentiment in the market.

According to ChemAnalyst, Ethylene Dichloride (EDC) prices are projected to experience an uptick in the forthcoming week. Notably, an anticipated increase in crude oil prices, driven by ongoing geopolitical disputes, is expected to impact the cost structure of EDC production. Additionally, the cost of ethylene, a primary raw material for EDC, is also expected to rise in April, adding further pressure on EDC pricing. On the supply side, producers are maintaining reduced operational rates at their plants, which could contribute to tighter supply conditions. This is compounded by several Polyvinyl Chloride (PVC) facilities undergoing routine maintenance, further constraining the availability of EDC in the market. Despite these upward pressures on prices from both raw material costs and supply constraints, the demand outlook from the downstream market may remain subdued.