The volatile price fluctuations of ethylene oxide are due to the interplay of a multitude of factors, including crude oil market, supply and demand imbalance, policy control, and technological succession. With reference to international oil prices, the volatility of international crude oil prices in 2024 is ±18%, and this is translated directly to the cost of ethylene production, which is the major feedstock of ethylene oxide, responsible for 60% to 70% of the cost. When oil prices rose from $80 / BBL to $105 / BBL, the production cost of ethylene rose by approximately 22 percent, and the ethylene oxide price rose 8.3 percent year on year to $1,350 / ton in Q4 2024 (CFR China). Conversely, if oil prices fall to $65 per barrel, profit margins for producers of ethylene can increase by 12 to 15 percent, providing the ethylene oxide price with downside.
The dynamic of supply and demand has significant influence on the cyclical fluctuation of ethylene oxide price. In the first quarter of 2025, the ethylene oxide spot supply in Asia was reduced by 12% to 15% due to the intensive maintenance of YNCC Lishui # and other cracking plants, and the peak price of ethylene oxide increased by 10% over the same period. In Europe, which has an operating rate for downstream derivatives like ethylene glycol at just 65% to 70% (10 percentage points lower than in Asia), weak demand restricts the expansion of the ethylene oxide price to 3% to 5%, and cross-regional discrepancies between supply and demand imbalances exacerbate volatility in the market. In addition, China’s 14th Five-Year Plan for the sake of promoting chemical capacity concentration, ethylene derivative capacity increase fell back to 4.5% in 2024, lower than the 6.2% growth in demand, once again amplifying the impact of tightened supply on ethylene oxide price.
Policy and logistic costs are other big variables. China lowered the value-added tax on imported ethylene oxide to 9 percent from 13 percent plus a further tariff of 6.5 percent in 2024. Imports are 5.8 percent to 7.2 percent lower in cost than locally made products, and the growth of imports each month is 23 percent. Meanwhile, however, the dry season in Panama Canal resulted in a 35% increase in charges for shipping between North America and Asia to $110 / ton, narrowing the cross-regional arbitrage window by some 18%, prompting traders to turn towards the Middle East source, driving the ethylene oxide price in the region up to $1,420 / ton FOB Middle East, 9.4% higher than the corresponding period of 2023. Furthermore, RMB exchange rate volatility (standard deviation 0.86) widens the importer’s procurement cost fluctuation range to ±4.2%, and the exchange rate risk must be covered with financial products, which indirectly increases the transaction cost.
Technology advancement and environment policy warp the future price curve. 15% unit energy saving and cost-cutting by 8% to 12% in 2024 by domestic ethylene oxidation process optimization and some businesses having already reduced quotation of ethylene oxide to $1,280 / ton, 5% less than industry average price. However, the European Union’s Carbon Border Regulation Mechanism (CBAM) levies a carbon surcharge of 55 euros per ton on importers, raising the European landed ethylene oxide price by 6.3 percent and widening the difference with the Asian price by 250 euros per ton. The two-way influence of such cycles of technology innovation and policy constraints implies that the cyclical fluctuations in the price of ethylene oxide are not only signs of short-term market fluctuation, but have to be incorporated into the overall industry chain cost model to make dynamic forecasts.