Northeast Asian Ethylene Prices Nearly Double, Iran's Conflict Affects Key Plastic Raw Material

Summary: ① There are signs that the turmoil in Iran is disrupting the supply of crude oil and production raw materials, causing turbulence in the global plastic market; ② As global supply tightens rapidly, U.S. producers see this as an opportunity to expand their overseas sales.

There are signs that the instability in Iran is disrupting the supply of crude oil and production raw materials, causing turmoil in the global plastic market, especially in Asia. At the same time, U.S. producers see this as an opportunity to expand their overseas sales.

Several force majeure declarations related to ethylene supply have led to a significant increase in the prices of ethylene and related chemical products in Asia.The Middle East tensions are disrupting the supply of ethylene feedstock for Northeast Asian producers heavily reliant on Middle East crude oil. Yeochun NCC, South Korea's largest ethylene producer, announced an force majeure this month, while ethylene supply in Japan is also becoming tight.

Naphtha is a key intermediate linking crude oil to basic petrochemicals such as ethylene and propylene. According to data from ICIS, a global provider of commodity market information services, more than 60% of Asia's seaborne naphtha imports come from the Middle East.

According to incomplete statistics, in the first two weeks of the current Middle East conflict, six out of Japan's 12 ethylene plants have announced production cuts. Citi analyst Yuta Nishiyama noted that Japan's naphtha reserves are sufficient to cover only 20 days of industrial consumption, and most of the naphtha is likely to be prioritized for gasoline production, making it difficult for the petrochemical industry to quickly restore stable expectations even if reserves are tapped.

Market data shows that, as of the close on March 19, the CFR Northeast Asia ethylene price has risen to above $1,351 per ton, reaching its highest level since April 2022. This figure is nearly double the low of $696 recorded at the beginning of the month.

As a major supplier of polyethylene and other petrochemical products, the Middle East faces export disruptions through the Strait of Hormuz, leading to tighter global supply. At the same time, plant shutdowns and raw material shortages in Asia have driven up prices across the entire plastic supply chain. This dynamic is increasing demand for U.S. polyethylene.

Industry insiders have noted that U.S. polyethylene producers have recently increased their procurement of the key raw material ethylene, indicating that manufacturers are striving to seize export opportunities amid tightening global supply.

As manufacturers stockpile raw materials, ethylene prices along the U.S. Gulf Coast have also continued to rise.According to a trader, the spot price for ethylene traded on Wednesday at Enterprise Products Partners LP’s Mont Belvieu hub in Texas was $0.3025 per pound. This price marks a further increase from approximately $0.27 per pound on Monday, which itself had reached a one-year high.

Harrison Jacoby, ICIS Americas Polyethylene Director, said that U.S. polyethylene producers "could set a record for production in March" as export demand rises, adding that operating rates could increase from the current level of around 90% to 100%.

According to ICIS, North American producers are pushing for a March contract price increase of approximately $0.10 per pound. ICIS data shows that North American producers, including LyondellBasell Industries NV and Dow Inc., account for more than 40% of global net polyethylene exports.

Meanwhile, the operating rate of U.S. ethane cracking units (used for ethylene production) has risen to over 90%, up from approximately 85% prior to the Iran conflict, reflecting improved profitability and stronger demand.