Introduction: Entering May 2026, the ethylene market has departed from its previous high-range fluctuation pattern and entered a rapid downward channel. As of May 21, spot prices in Northeast Asia have fallen to the $1,100/ton threshold, while domestic market prices have even broken below the 8,000 yuan/ton mark. Within the month, ethylene pricing logic has reverted to fundamental supply-demand dynamics. Under the dual pressure of persistently ample supply and weak demand, market signals for a downturn are frequent.

I. Price Review: Unrelenting Decline, Both Domestic and International Ethylene Break Key Levels

Domestically, Figure 1 shows a clear price decline for ethylene since May. As of May 21, the mainstream ex-tank price in the East China region had dropped to 7,900 yuan/ton, down nearly 700 yuan/ton from the beginning of the month; in the Shandong region, the mainstream ex-tank price fell to 7,800-8,000 yuan/ton, a decrease of nearly 475 yuan/ton from early May, with some low-end negotiated prices already breaking below 7,500 yuan/ton. Recently, the mainstream delivered price for downstream buyers has retreated to 7,800-7,900 yuan/ton. Affected by poor market expectations, some holders have taken short positions, leading some delivered transaction prices to fall below the mainstream ex-tank levels.

In USD-denominated terms, compared to the RMB market, the decline in the USD market was relatively moderate earlier but has suddenly weakened significantly since this week. As of May 21, CFR Northeast Asia landed prices have dropped to around $1,100/ton, with a single-day maximum decline of $80/ton within the week. According to market sources, current domestic buyer bids have fallen to around $1,050/ton, reflecting a generally pessimistic market sentiment.

In May, both domestic and international ethylene markets weakened synchronously, highlighting a pronounced downward price trend. The market pricing logic underwent a clear shift during the month, with macroeconomic influences gradually weakening and supply-demand fundamentals becoming the core factor driving the market. A combination of multiple bearish factors on both the supply and demand sides is the key trigger for the sustained decline in domestic and international prices. Coupled with weak market expectations, this has further dragged transaction prices lower.

II. Supply Side: From 'Tight Balance' to 'Localized Oversupply', Fundamentals Shift to Easing

A review of domestic commercial circulation volumes over the past year (Figure 3) clearly shows that April-May 2026 is the peak period within the annual cycle. The main reasons are the sequential restart of merchant naphtha crackers in South China and the Northeast, stable operating rates at other merchant ethylene production enterprises, coupled with temporary fluctuations in downstream units of some merchant suppliers, collectively leading to continuously ample commercial circulation during April-May. Specifically, May's commercial circulation volume approached 400,000 tons, reaching a historical high.

For imported resources, over 75% of South Korea's imported naphtha relies on the Middle East. Disruptions to shipping through the Strait of Hormuz directly impacted its raw material procurement channels, forcing domestic naphtha crackers to collectively reduce operating rates due to supply disruption risks. To address the ongoing Middle Eastern supply chain interruptions, the South Korean Ministry of Trade, Industry and Energy announced in early April an allocation of 469.5 billion won (approximately $310 million) to subsidize naphtha imports. Under the plan, the government covers 50% of the increase in naphtha import unit prices since the conflict began. Encouraged by this policy, major producers such as YNCC, LG Chem, Lotte Chemical, GS, and KPIC have gradually increased operating rates, and regional supply availability is being progressively restored.

III. Demand Side: Procurement Demand Contracts, Downstream Bargaining Power Increases

Weak demand is the core driver of this price decline. Ethylene's major downstream products (styrene, ethylene oxide, and PE) are extremely weak, unable to absorb high-priced ethylene.

1. Styrene/Ethylene Oxide Enter Maintenance Wave
Table 1 Recent Styrene/Ethylene Oxide Maintenance Schedule

| Province | Company Name | Product Name | Capacity (10,000 tons/year) | Maintenance Start | Maintenance End |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Zhejiang | Zhejiang Petrochemical | Styrene | 60 | 2026/5/9 | 2026/6/8 |
| Shandong | Zibo Junchen | Styrene | 50 | 2026/5/12 | 2026/6/10 |
| Shandong | Shandong Yulong | Styrene | 50 | 2026/5/12 | 2026/5/27 |
| Jiangsu | Changzhou Xinyang | Styrene | 30 | 2026/5/12 | 2026/5/31 |
| Liaoning | Jincheng Basel | Styrene | 35 | 2026/5/15 | 2026/6/14 |
| Jiangsu | Jinyan | Ethylene Oxide | 26 | 2026/5/9 | TBD |
| Shandong | Levima Advanced Materials | Ethylene Oxide | 26 | 2026/5/12 | 2026/5/19 |
| Jiangsu | Far Eastern Union | Ethylene Oxide | 26 | 2026/5/20 | 2026/6/20 |

Data source: chempricehub Intelligence

Ethylene oxide and styrene account for over 70% of domestic truck-transported downstream procurement demand. Key downstream plants for ethylene oxide have entered a concentrated maintenance season, and the styrene industry has also reduced output due to thin profit margins. The shutdown of these procurement-intensive downstream units directly resulted in the market suddenly losing its largest buyers, forcing holders to sell at lower prices.

2. PE Industry's Cost Collapse:

The polyethylene market has been continuously falling. Unable to sell finished products at high prices, many PE plants have shut down or reduced operating rates, with operating rates dropping to around 74% at the lowest. This directly reduced the consumption of ethylene feedstock.

3. Resistant Psychology of 'Buying on Rising, Not Falling'

In a downward channel, buyers generally adopt a 'buy on rising, not falling' mentality. Even though prices are already very low, plants continue to use a 'buy selectively at lows' strategy, maintaining only essential procurement, forcing upstream to continue cutting prices.

IV. Market Outlook: Ethylene Prices Still Have Room to Decline, but the Downward Momentum Will Gradually Narrow

Domestic and Northeast Asian ethylene prices have undergone a deep correction after the previous surge, presenting a co-driven decline influenced by multiple factors. On the supply side, the recovery in operating rates at Japanese and South Korean crackers, coupled with continuously ample supply from Northern Chinese sources, has led to an overall loose supply chain in Northeast Asia. On the demand side, negative feedback continues to propagate from ethylene oxide plant maintenance and rate reductions, PE entering the off-season, weak PVC profitability, and losses in the downstream styrene sector, serving as the main drag on prices. Currently, the market's ability to accept lower prices has increased, and there is no expectation of a sharp further decline, but the overall fundamentals remain weak. Over the next two weeks, domestic ethylene prices are expected to trade in the range of 7,600-8,000 yuan/ton, while USD-denominated prices are expected to trade in the range of $1,050-$1,120/ton.