Linear Alpha Olefins (LAO) Pricing Analysis

Contract negotiation

Length of contracts

Global players and large buyers such as DowDuPont generally prefer an agreement for a minimum tenure of 8-10 years. The companies have a long term price advantage. In comparison to other petrochemicals, the LAOs market is relatively undeveloped. A small-capacity closure can lead to an imbalance. Though some alterations in the process conditions can be made to meet market demand. However, the imbalance is balanced by bringing a wide variation in the prices of each of LAO fractions. 

Pricing of LAOs will also be impacted by new production capacity, closure & maintenance and subdued demand for polymers like LLDPE and HDPE resins, raw material and any other new regulations. The LAOs are consumed in both developed and developing countries. Most of the LAO is used for products that require superior properties. Given the nature of the current LAO manufacturing processes and the limited number of producers, LAOs each fraction has its own supply-demand balance. Since the production of LAO, especially in for the full range LAOs, the prices of one fraction may escalate to other individual LAO fractions depending on the demand for each of the fractions.

The LAOs prices may vary for different fraction and with consideration of the specific feedstocks involved. Historically, the raffinate-based butene producers have set the market price.C10+ products will see pricing on an ethylene-based formula with adders of50 to 70 c/lb based on individual fraction supply/demand in the marketplace.

The higher LAOs Pricing basis can be roughly assumed as

C10Price = (Ethylene price X0.94) + factor (US$ 190 / ton)

C12-14Blend Price = (Ethylene price X1.08) + factor (US$ 93 / ton)

C16-18Blend Price = (Ethylene price X1.25)

C20Blend Price = (Ethylene price X0.64)

The average LAO prices in the Asia-Pacific region for the purpose of value market calculation has been considered as

Butene-1 has been around $ 0.9/ kg

Higher LAOs has been around $ 1.2 / kg

Asia-Pacific Higher LAO Average Prices ($/ Kg)