Surge in European Ethylene Dichloride Prices Amidst Low Downstream Demand

Hamburg (Germany): During the initial week of February 2024, the Ethylene Dichloride (EDC) market witnessed a substantial surge in prices, experiencing a 2.58% increase from USD 335/MT in the third week of January to USD 345/MT. This notable uptick in EDC prices correlates with the continuous upward trajectory observed in upstream crude oil prices within the country over the past few months.

Suppliers have actively participated in the accumulation of EDC inventories, contributing to the observed price surge during this specific period. The escalation in EDC prices aligns with global trade concerns arising from threats to critical Middle Eastern trade routes. The surge in ocean freight rates has presented a considerable challenge for shippers, necessitating the exploration of viable alternatives for transporting goods from China to Europe. This challenge is further exacerbated by disruptions resulting from attacks on the Red Sea, a vital ocean route, introducing complexities to the transportation of goods in the region.

In response to the Red Sea crisis causing delays and resulting in tightened supplies in Asia during February, major producers strategically chose to prioritize the export of EDC. Despite this strategic decision, prices for EDC Ex-Riyadh have remained stable at USD 259/MT in the Saudi Arabian market for the week ending on February 2nd. However, there has been a slight uptick in the upstream Ethylene market.

The largest chemicals producer in Saudi Arabia has expressed caution regarding another challenging period for the industry. The demand for chemicals, critical in the production of plastics for diverse products like cars and mobile phones, has been adversely affected by sluggish growth. In anticipation of the projected decline in oil demand, particularly in the transport sector, Saudi Arabia is strategically shifting its focus by directing more crude towards chemical production.

According to ChemAnalyst's projections, there is an anticipated increase in EDC prices in the forthcoming weeks in Europe. This is attributed to the country's deliberate reduction in production and output, aimed at sustaining the rise in prices and potentially introducing volatility to the market to boost EDC prices.

This strategic manoeuvre is influenced by the constraints on trade options and the expected surge in freight charges. The United States has played a pivotal role in contributing to global EDC volumes through shipments to major markets. Additionally, prices in the Middle East are poised to rise due to escalating investments in infrastructure, residential, and commercial projects, subsequently influencing the demand for EDC in the regional market.