Petrochemical Giants Shut Down Plants Yet Ethylene Prices Show No Improvement

Hamburg (Germany): After experiencing an uptrend in the previous week, ethylene prices dropped in the third week of April despite persistent supply shortages in the regional market, reflecting bearish sentiment in the European ethylene market. Since the beginning of April 2024, feedstock prices have consistently declined, contributing to the downward shift in product price realization. Additionally, demand for ethylene has shown no signs of improvement across the regional market, further weakening prices.

On the other hand, the downturn in petrochemicals continues to heavily impact the European market, as two of the continent's largest petrochemical makers have planned to shut down their ethylene plants. According to ChemAnalyst's latest database, ethylene prices have declined by USD 20/MT in the German market. The cost pressure from feedstock naphtha on the product has been limited as naphtha prices continue to drop, driving down product prices in the domestic market.

Furthermore, geopolitical conflicts and output cuts have been prominent during this period. Tensions between Israel and Iran have fluctuated daily, managing to keep energy prices at or above a certain threshold amid concerns about further tightening. However, oil prices have recently corrected downward as worries over conflicts in the Middle East eased and business activity in the United States slowed. Additionally, a fall in US crude oil inventories has further supported this downturn. The fall in oil prices has eased the overall production cost of ethylene. However, ethylene availability remained tight due to low operating rates in the domestic market and slow imports from the US and Asian markets.

Despite a decrease in the inflation rate, demand for ethylene from the downstream polyethylene industry was relatively average, as buyers expressed concerns about the outlook for end-product demand. Consequently, purchases remained limited to basic needs. Furthermore, major ethylene producer BASF reported a 12.4% decline in sales during the first quarter of 2024, mainly driven by significantly reduced prices resulting from lower feedstock and energy prices across all segments, including ethylene. Consequently, ethylene prices FD Hamburg settled at USD 870/MT during the week ending April 19th.

On a related note, Exxon Mobil Chemical plans to close its ethylene cracker and derivatives units at its Gravenchon site in Port-Jerome-sur-Seine, France, in 2024. This closure includes an ethylene steam cracker with a 400,000 metric ton annual capacity, as well as downstream polyethylene and polypropylene plants. Additionally, Saudi Arabia’s Sabic plans to permanently close its olefins 3 crackers at its Geleen Netherlands site. Market players anticipate that the permanent shutdown of ethylene units might impact the product supply in the near term, leading to limited availability within the regional market.

Looking ahead, ChemAnalyst projects that ethylene prices are expected to rise in the European market in the forthcoming weeks. Demand from downstream polyethylene and other derivative industries is likely to improve, albeit at a slower pace. Furthermore, feedstock naphtha prices may increase as crude oil prices are anticipated to rise in the coming weeks, thereby raising the production cost of product.