Hexene Prices Continues Converge Globally as Demand Slows Down, Supply Tightens

Texas (USA): Globally, Hexene prices across regions including Asia, the Middle East, Europe, and North America continue to converge towards a price point of USD 1800/MT. While North American prices continue to progress upwards, the rest of the globe is facing deflationary pressures intensifying as Q2 2024 begins. The diverging pricing movements are beginning to settle the global prices of Hexene to a single price with minor fluctuations in the spot market throughout the next quarter. With Chinese April data on manufacturing reflecting a slowdown in growth momentum gains of the previous month, Hexene prices are expected to follow a similar trend, as per ChemAnalyst.

Hexene is a major component in building stable LLDPE and HDPE resins, providing resistance against branching in the polymerization process. ChemAnalyst research shows that USA’s Hexene production is currently lower than historical advantages despite newer capacity added last year. The operating levels are currently near 70% of capacity, with suppliers having a hard time finding buyers in the global market, as revealed by a market player.

Another challenge the US markets are facing is the subdued spot market of Hexene. Hexene is currently traded on a contract basis. A market player revealed that the present situation of rising spot prices for Hexene FOB Texas basis from USD 1400/MT to over USD 1650/MT in the past six weeks is attested to supply shortages as producers continue to calibrate their production to cater to contracts, and spot prices are currently following inventory trends rather than production trends.

Market participants agree with the assessment that suppliers want to raise Hexene prices to gain economy once interest rates cool off and PE demand picks up. PE margins have remained historically low, as assessed by one market participant, despite the US holding an advantage over cheap gas-based feedstock, as revealed by another market participant.

In the European and Asian markets, prices of Hexene are deflating partially due to the rise in gas-based feedstock for cracking and shift from Naphtha, and partially due to weaker demand, with producers revising prices downwards to stimulate PE demand by offering higher discounts. US EIA and European Commission reports show that natural gas and LNG prices have deflated by 44% over March 2023 prices, with newer contracts for six-monthly supply to Korean major petrochemicals being assessed for gas CFR basis, which was 27% lower than last year's supply cost. Subsequently, Korean and European crackers have been trimmed and tuned to adjust to higher gas feedstock, though Naphtha volumes continue to be purchased for Hexene and ethylene production. Oligomerization rates have fallen as Hexene demand is currently lower across Asia and Europe due to weak PE margins and deteriorating cracker margins after gas prices began to rise in February owing to higher electricity demand.

Hexene prices for the time being are forecasted to slow down further in Europe, Asia, and the Middle East, while US prices are showing signs of stabilization, as further acceleration in spot prices of Hexene would reduce PE margins to unsustainable levels. The US is already seeing a trimming down of demand with both crackers and PE plants of ExxonMobil Chemical at Beaumont going offline as inventories are close to sustainable levels. A pickup in demand for Hexene is expected once rate cuts begin, preferably by the end of Q2.