US-Europe Ethylene Arbitrage Opens with 20,000 mt Heading for Europe
A tightening of ethylene supply in Europe has opened an arbitrage window into the region from the U.S., enabling traders to ship cargoes into the European pipeline system, sources have told OPIS.
The arbitrage has been enhanced by ample U.S. inventories, low U.S. feedstock costs, competitive freight rates to cross the Atlantic, and a strong euro-dollar exchange rate, sources said.
Coastal vessel offers of ethylene from the U.S. for second-half February to first-half March delivery have seen at a discount to the February contract
price of 45% or around €600 ($700)/mt CIF Europe. At the same time in the inland free delivered Aethylen Rohrleitungs Geselschafft (ARG) pipeline,
ethylene was heard at a discount of 36% to the February contract price or around €700($830)/mt, according to market sources.
This has meant that olefins traders and arbitrageurs are able to handle deep sea cargo logistics and could realize a margin from shipping for loading into the pipeline, according to one trader.
“Coastal discounts [versus the February contract] are still very deep,” the trader said, meaning that the prices of the imported ethylene from the U.S. are low or competitive versus domestically delivered spot material. “Buyers with deep sea access can buy coast (vessels) and flip onto the pipe.”
“A strong Euro versus the dollar, weak U.S. natural gas, bullish crude and weak freight make this ideal trading conditions at moment.”
The euro versus the dollar hit a high of $1.19 at the end of January, the highest in more than four years, and remains at $1.185. This means that
producers make a profit from buying in dollars and selling in euros, while arise in crude oil prices makes it more profitable for importers to sell the
feedstock-advantaged US ethylene in the European market compared to the Northwest European contract-priced domestically-produced material. The February
contract settled at €1,095/mt.
“Indeed, the arb is open, and those who have ARG access and can secure Handy-size vessels must be very active at the moment,” a second European trader
said.
Supply-led price volatility as spot becomes focus
Approximately 100 million pounds or around 45,000 metric tons of ethylene traded last week, Mont Belvieu into the Enterprise Terminal, according to data from OPIS PetroChem Wire (PCW), a Dow Jones company. The second trader said
around half of that amount was set for export.
PCW data showed that most of these volumes were heard trading at around 19.50 cents/lb, or around $430/mt FOB U.S. Gulf Coast. Taking into account $200/mt for pressurized gas carrier freight and other logistics costs, for CIF Europe prices based on the $700/mt, arbitrageurs can lock in a profit margin of around $70/mt for export deliveries into Europe.
European inland ARG pipeline prices have increased due to a combination of unplanned production outages and planned second quarter turnaround season. In addition, a change in 2026 term offtake agreements has meant less fixed contract volumes and greater spot price exposure, which means that buyers are nominating more spot volumes than in 2025, and so putting upward pressure on spot prices. The rise is supply related, which means a prompt supply price volatility.
Around 2.5 million mt of European ethylene capacity is set to undergo planned maintenance in the second quarter. Some downstream and upstream ethylene units have suffered unplanned stoppages or have declared force majeure in the Amsterdam-Rotterdam-Antwerp hub of Northwest Europe and in the Mediterranean.
Reporting by Miguel Cambeiro, mcambeiro@opisnet.com