The global olefin_market is uncertain in the second half of the year

Entering the second half of 2022, uncertain world economic prospects, volatile oil prices and ongoing logistical challenges cast a veil of uncertainty over the global ethylene and propylene industry chain. In general, all regions have difficulties to overcome, and the global olefin market situation is not optimistic.

In Europe, slow regional economic growth and high inflation are expected to lead to weaker demand for polyolefins in the second half of the year and a slowdown in the olefins market. "If people think the ethylene market is going to get better, that's a joke," S&P Global quoted a buyer as saying. "The fundamentals are all pointing in one direction now, and a recession is imminent." Other sources in the polymer market were less pessimistic, saying The polymer market remains stable. Even so, overall polymer demand in Europe is on a downward trend, including in the construction, automotive and appliance industries, while sectors such as packaging are more resilient. "The industry is in crisis and we are not sure how much financial pressure our customers can take. Customers are now very cautious about how much they need to order," said a European polyethylene resin trader. Analysts at S&P Global European polyethylene resin prices are expected to weaken in the second half of the year, in line with the weaker macroeconomic outlook, given the high inflation and macroeconomic recessionary environment.

In the U.S., rising ethane prices and supply expansion have reduced ethylene margins to below their five-year average. U.S. ethylene exports nearly tripled in the first four months of the year, but the region's ethylene shutdown rate is at an all-time low. As logistical difficulties limit polymer exports, polyethylene resin traders have been reporting high inventories and near-full warehouse capacity, and U.S. ethylene producers are expected to consider lowering operating load rates in the second half of the year. In addition, the impact of this year's Atlantic hurricane season on the US chemical industry is still difficult to predict. However, the National Oceanic and Atmospheric Administration (NOAA) is forecasting an above-average hurricane frequency this season, with six to 10 hurricanes, at least half of which will be major storms with winds over 110 mph. This could lead to a short-term slump in U.S. olefin supply.

In Asia, where naphtha is the main raw material, the situation of ethylene suppliers is hardly optimistic. Naphtha cracking margins have improved since early 2022, but remain well below the 5-year average. A South Korean ethylene producer said: "With such weak demand and customers worried about profit margins, it is impossible for us to raise ethylene prices, the best strategy is to reduce operating rates and reduce spot sales as naphtha prices remain high. ” With the planned restart of multiple ethylene crackers in South Korea, the Philippines and Malaysia, Asia’s ethylene profit margin is expected to remain weak in the third quarter. The fall maintenance season could tighten and support the market, especially if demand recovers. However, market participants are generally concerned that inflationary pressures will dampen consumer spending and reduce polyethylene consumption, and the supply-demand imbalance will further increase if new polyethylene capacity starts up as planned in the region. Propylene profit margins in Asia are also low, in part because capacity growth is faster than demand recovery. Strong refining margins have spurred higher catalytic cracking unit (FCC) operating load factors, increasing by-product propylene production and exacerbating a propylene oversupply problem in the region. In addition, the new crown pneumonia epidemic in Northeast Asia and its prevention and control are also the focus of the global market. Market participants believe that the price of ethylene derivatives in Northeast Asia is at a historically high level, but profit margins have been low or even negative. The operating rate of the device is difficult to maintain.