ICIS Value Chain: Ethylene

27 June 2014 09:44 Source:ICIS Chemical Business



  • 58% derivative
  • US PE buyers expect price drop based on slow summer demand. Tight supply stopped prices falling.
  • US producers expect to keep control on pricing until 2015 when projects start up.
  • China PE and PP under pressure as domestic economy slows; poor export demand, while domestic projects start.
  • China 2014: 2.2m tonnes/year of PE and 3.9m tonnes/year of PP on stream.
  • China’s tight monetary policy hits downstream SME finance and demand.
  • Europe availability curbed by production cutbacks; fundamental demand slow but sales supported by fewer imports.
  • Europe naphtha-based producers face competition from US and Middle East.
  • Several closures already in place and slated for 2014-2015 to avoid oversupply in high-cost European markets.


  • Structural supply length in Europe and economics of light feedstocks supports export arbitrage.
  • Europe crackers threatened by lower-cost Middle East and US plants.
  • Big disconnect between spot and contract prices likely to persist in near to medium-term.
  • Asia demand driven by downstream expansions in China in polyethylene, ethylene oxide and styrene monomer.
  • Derivative expansions in China undermine downstream prices.
  • Asia derivatives must compete with lower-cost US ethane-based projects.
  • Restart of US Evangeline Pipeline restores supply balance.
  • US prices expected to fall as supply improves on several cracker restarts and capacity expansions.

Ethylene oxide/MEG

  • 15% derivative
  • Majority of Europe and US EO contracts are formula-based, so they follow ethylene.
  • Europe EO balanced to tight because of hefty shutdown schedule in 2014.
  • EO tight in US due to a plant turnaround, low rates at another, and strong demand.
  • US oversold because of supply tightness and demand from ethylene glycols.
  • As a net importer, Europe’s MEG prices depend partly on dominant Asia.
  • Europe MEG balanced-to-tight because of turnarounds and downstream start-ups.
  • US MEG contract pricing steady thanks to good demand and plentiful supply.
  • Demand good in downstream polyethylene terephthalate (PET), which is in its seasonal summer bottle upswing.
  • Summer bump in demand from coolant sector plus start of anti-freeze season.
  • Asia MEG prices dependent on China due to expanding polyester sector.
  • Asia expected tighter amid turnarounds there and Middle East in H2.
  • Asia prices influenced by MEG traders who look to co-product PTA for polyester.



  • 11% derivative
  • European ethylene dichloride (EDC)/polyvinyl chloride (PVC) sellers keen to compensate for price erosion
  • Low margins mean market consolidation is a main topic in Europe EDC/PVC
  • INEOS ChlorVinyls and Solvay’s joint venture has EU final approval
  • US ethane from shale fields has given US producers a global cost advantage
  • US EDC exports up 40% in 2013 mainly to China, Japan, Korea, Taiwan and Egypt
  • New US Dow Chemical-Mitsui Chlor-Alkali production is providing 400,000 tonnes of ethylene and 400,000 tonnes of chlorine for EDC production each year.
  • Huge price gap between Asian EDC buyers and sellers. Buyers can’t pay more due to poor PVC prices and performance, and sellers suffer high ethylene prices
  • EDC supply is balanced to long in Asia. Buyers amply stocked with contract EDC from the US and the Middle-East.


  • 6% derivative
  • Europe styrene market has seen a slow recovery so far in 2014, but availability has been ample due to US imports and weak Asia demand
  • Benzene prices continue drive styrene in Europe, with structural tightness for both products likely to support a strong margin between the two
  • European spot pricing could see a sharp upturn as summer approaches, with a squeeze on prompt availability
  • US is the key export market for styrene globally due to its cheap ethylene giving it a significant cost advantage
  • Tightness and limited growth on benzene will limit US styrene availability
  • Demand in Asia has been weaker than expected so far in 2014, which has had an impact on global pricing and trade
  • Inventories remain historically high, a further indication of weak offtake in Asia
  • Chinese economic growth has slowed, impacting styrenics demand, while exports of finished goods have been slow.

Regional breakdown of Ethylene value chain prices

By Will Beacham