Global Hexene Prices Likely to Surge Amid Escalating Israel-Gaza Conflict in the Middle East

Global crude oil prices continue to surge as the Israel-Hamas conflict worsens in the Middle East and Mediterranean areas. Arab light continued the bullish trend with a daily increment of 3.5%, reaching $91/bbl on 10th October 2023. Similarly, WTI crude marched to $86/bbl, rising at a daily average of 3%. Petrochemical producers, especially Hexene, have speeded up their procurement activities to hedge against the sudden rise of crude if the conflict intensifies. The conflict puts extreme pressure on ethylene futures and spot sales, and the globe is facing an ethylene shortage, pushing the cost down the value chain significantly. Ethylene is derived from Naphtha, which is the direct product of crude. Naphtha prices in recent months have been bullish as crude crunch triggered by OPEC+ and Russia. Middle Eastern countries continue to dominate the Naphtha market at the global level. Europe and Asia are the major importers of Middle Eastern Naphtha. According to experts, if the Middle East goes into turmoil, supply routes to Asia and Europe are compromised, significantly pushing up the freight and fuel charges across the globe. Studies done by ChemAnalyst researchers show that though the Asia Mediterranean freight charges continue to plunge, any geopolitical tensions could trigger the soaring of freight charges by over 70% MoM basis.

Hexene, an oligomeric commodity obtained from the Ethylene value chain, is essential for the production of plastics to continue to show a bearish trend across the globe due to weak global demand and high energy prices. Multiple experts believe that Hexene prices remain higher than pre-COVID levels despite weak demand. Further, the downstream consequences of inflated Hexene prices have continued to distress the global construction sectors. As the global construction industry continues to face a slump, Hexene prices continue to plunge. In North America, especially the USA,  stagnation is observed in the construction industry, causing a significant decline and destocking of major intermediate petrochemicals like Hexene, Vinyl Acetate, etc. US is significantly improving Hexene and ethylene capacity in the given timeframe to reduce reliance on the Middle East and East Asia. The imports from the Middle East shall remain substantial for some more time. As rising tensions in the Middle East are expected to trigger a situation of global supply disruption of major chemicals, including Hexene, the prices of most of the consumer products like plastics, adhesives, detergents, etc., are expected to surge significantly, pushing up the necessary expenditure further without commemorate increment in global income as income remain stagnated and facing recessionary trends in many European nations.

One major significance of rising Hexene prices is the rise in automobile prices further. Major petrochemical markets are currently being driven by healthy sales in the automobile sector across the globe, including Europe and the USA. Automobiles are one of the largest end users of polyethylene products, including coatings and paints derived from Hexene. The Hexene market continues to owe significant sales to automobiles. To reduce reliance on Russia and fossil fuels, Europe and North America have aggressively pushed for the active climate change agenda by transitioning to Electric Vehicles and renewable energy, which are substantially fueled by polyethylene-based products. ChemAnalyst estimates that around 7% of the weight in an EV and 8-12% of solar panel weight are derived from Hexene and polyethylene value chains. If the Hexene prices surge, multiple experts argue for stagnation in the transition from fossil fuels to Electric adoption across the globe.

While discussing many factors, major economists across the globe have been focusing on the freight charges around the Mediterranean. The charges have been skyrocketing around the Mediterranean and the Red Sea since the conflict began, which is further going to add significant costs to the rising Hexene and plastics value chain. Asia and Europe freight charges have been at an all-time low due to lower trade volumes, and the major trade items include chemical intermediaries like Hexene from Asia to Europe. As the conflict intensifies, freight and Hexene prices across Asia Europe trade route is going to increase, pushing both Europe and Asia into significant recessionary pressure because of supply breakdown. While China is in talks with Russia to improve its oil sales, other major Asian nations like India are looking for options for a reliable crude supply due to their high import reliance. So far, Saudi Arabia has continued to ensure a stable supply of crude and petrochemicals like Hexene and fulfill its contractual obligations.