Northeast Asia Ethylene Prices Nearly Double as Iran Conflict Spreads to Key Plastics Raw Materials

Ask AI · How are U.S. producers leveraging supply shortages to expand exports?

Caixin, March 20 (Editor: Xiaoxiang) Signs indicate that as turmoil in Iran disrupts the supply of crude oil and raw materials for production, the global, especially Asian, plastics markets are experiencing turbulence. Amid rapidly tightening supplies, U.S. producers see this as a good opportunity to expand overseas sales.

Several force majeure declarations related to ethylene supply have caused significant increases in prices for Asian ethylene and related chemicals. Tensions in the Middle East are disrupting ethylene raw material supplies for Northeast Asian producers heavily dependent on Middle Eastern oil. Korea’s largest ethylene producer, Yeochun NCC, announced force majeure this month, and ethylene supplies in Japan are also tightening.

Naphtha is a key intermediate connecting crude oil to basic chemicals like ethylene and propylene. According to data from ICIS, a global commodities market information provider, over 60% of Asia’s marine naphtha imports come from the Middle East.

Preliminary statistics show that in the first two weeks of the Middle East conflict, six out of twelve Japanese ethylene plants announced capacity reductions. Citi analyst Yuta Nishiyama noted that Japan’s naphtha reserves are only enough to sustain industrial consumption for 20 days, and most naphtha may be prioritized for gasoline production. Even with reserves, it’s difficult for the petrochemical industry to quickly restore stable expectations.

Market data shows that as of the close on March 19, CFR Northeast Asia ethylene prices had risen above $1,351 per ton, reaching a new high since April 2022. This figure is nearly double the low of $696 at the beginning of the month.

As a major supplier of polyethylene and other petrochemical products, the Middle East’s exports through the Strait of Hormuz have been disrupted, leading to tighter global supplies. Meanwhile, production halts and raw material shortages in Asia have also driven up prices across the entire plastics supply chain. This dynamic is fueling demand for U.S.-produced polyethylene.

Industry insiders note that U.S. polyethylene producers have recently increased their procurement of key raw material ethylene, indicating that manufacturers are actively seizing export opportunities amid tightening global supplies.

As manufacturers stockpile raw materials, ethylene prices along the U.S. Gulf Coast continue to rise. A trader said that on Wednesday, at the Enterprise Products Partners LP hub in Beaumont, Texas, spot ethylene prices were $0.3025 per pound, up from about $0.27 on Monday, which was already a one-year high.

ICIS Americas Polyethylene Director Harrison Jacoby stated that with increasing export demand, U.S. polyethylene producers “may set a record for March production,” adding that operating rates could rise from the current approximately 90% to 100%.

According to ICIS, North American producers are pushing March contract prices up by about $0.10 per pound. Data shows that North American producers, including LyondellBasell Industries NV and Dow Inc., account for over 40% of the global polyethylene net exports.

Meanwhile, the utilization rate of U.S. ethane cracking units (used for ethylene production) has risen to just over 90%, higher than the roughly 85% before the Iran conflict, reflecting improved profit margins and demand.

(Caixin, Xiaoxiang)