Middle East tensions disrupt 3.9% of global ethylene capacity, driving European polymer prices up – ICIS

EUROPE – European polyethylene and polypropylene markets have been thrown into chaos since the Middle East conflict escalated, with 3.9 percent of global ethylene capacity now under force majeure and spot polypropylene prices spiking 25 percent in a single week.

The sudden shock of hikes in crude, naphtha, and energy prices has overwhelmed Europe’s slow-moving contract system.

Brent crude surged from US$71 per barrel to US$94 in just ten days, while the Strait of Hormuz, through which nearly 20 percent of global oil flows, has become a war zone.

Supply Chain Collapse by the Numbers

Morgan Stanley’s force majeure tracker reveals staggering disruption: 3.9 percent of global ethylene and 3.2 percent of propylene capacity now sit idle.

Central Europe faces a breathtaking 60.2 percent disruption rate, while Southeast Asia grapples with 20.4 percent offline.

The feedstock crunch has spread across Asia, where Middle Eastern suppliers provide over 60 percent of naphtha.

South Korea’s Yeochun NCC slashed operating rates from 93 to 66 percent, while Mitsubishi Chemical and LG Chem have followed suit with drastic cuts.

Price Explosion Across the Value Chain

The supply shock has triggered historic price spikes.

North American spot polypropylene surged 25 percent in a single week, while polyethylene jumped 15.1 percent.

European markets followed, with polypropylene rising 7.1 percent and polyethylene up 8.6 percent.

Upstream carnage is equally dramatic.

Naphtha prices rocketed 25 percent from US$590 to US$737 per ton in just four days. Asian benzene jumped 20 percent in March, while Chinese propylene climbed 7 percent on crude’s 11 percent rise.

Producers Rip Up Contracts

European propylene contracts settled at €1,000 (US$1,153) per metric ton before the crisis, a figure now woefully inadequate. Producers have activated hardship clauses, revising or ignoring existing agreements.

Price requests have exploded from €200 (US$230) per tonne for March to €400-600 (US$461-692), depending on product.

Demand Destruction Looms

Consumer demand hasn’t budged.

As one converter noted, nobody buys more yogurt because polymer prices rise. Another warned of being squeezed in the middle, unable to pass costs downstream.

With raw materials accounting for 30 to 70 percent of selling prices, the EuPC warns oil’s influence is now critical.

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