Platts: Petrochemical Prices Hit Fresh Six-Month Highs in April, Before Finishing Lower
LONDON, May 13 /PRNewswire-FirstCall/ -- Platts -- The price uptrend in the $2.8 trillion global petrochemicals business continued into early April establishing fresh six-month highs, before giving way to an overall price decline for the month, according to the Platts Global Petrochemical Index (PGPI) data just released. The index, a basket of the most widely-used petrochemicals prices expressed in dollars per metric ton ($/mt), has been edging higher in 2010 on stock replenishing, increased demand and strengthening crude oil values.
The PGPI peaked at $1,262 per metric ton (/mt) in the first half of April, before dropping 5.5% to close the month at $1,192/mt. This compares to the March closing price of $1,233/mt and marks a 3.3% month-on-month decline. However, according to Platts conversations with industry sources, it's not clear that market fundamentals have turned long term bearish. The daily PGPI for April averaged $1,237/mt, which is 2% higher than the average in March of $1,213/mt. The higher daily average is possibly the result of petrochemical consumers holding on inventories while keeping watch on the developments in Greece, Ireland, Portugal and Spain, including the downgrade of debt ratings for several.
Americas
"However, on a monthly basis April brought with it a wrecking ball, toppling key feedstock prices," said Ihsan Rahim, Platts managing editor for Americas petrochemicals. "Prices of olefins, one of the basic building blocks for the petrochemicals industry, plummeted, with ethylene, the most basic olefins and feedstock for the ubiquitous plastics industry, losing almost 50% if its value," Rahim said.
Rahim said the collapse in U.S. olefins prices has yet to fully feed through to the plastics and everyday consumer prices, and additional downside pressure may be ahead since Dow Chemical, Ineos, Chevron Phillips Chemical and other such producers are bringing production back online and increasing supply.
Asia
Likewise in Asia, at least a temporary end to the ethylene price rise is afoot. Previous production stoppages at a number of steam-crackers complexes have been resolved and manufacturing restarted, according to Quintella Koh, Platts managing editor for Asian petrochemicals
"Also, because ethylene spot prices had jumped so much, polyethylene producers now find it more profitable to buy polyethylene outright in the spot market to cover short positions, rather than spend money on buying expensive ethylene to produce polyethylene," Koh noted. Polyethylene is the raw material to make plastic containers, shrink films for packaging, plastic bags and bottle caps, among other consumer products. She points to Coca Cola as one example of expansion for polymers manufacturing activities, noting its plans for two or three new bottling plants in China.
"I think China will overtake the United States to become the world's largest non-alcoholic ready-to-drink market in a fairly short period of time," said Muhtar Kent, chairman and CEO of Coca-Cola, according to recent Platts reports. These plans augur well for the petrochemicals industry, in particular manufacturer of polyethylene terephthalate (PET) plastic bottles, thus fueling demand for PET polymer resins.
Europe
Meanwhile in Europe, polymer prices continued to firm in April, responding to thinning supplies from most European producers. "The lack of visible imports coupled with improving end-user demand in most plastic applications helped sustained sellers' higher asking prices," said Ilana Djelal, Platts managing editor for European petrochemicals. In addition, the drop in the euro and strong demand in Latin America have encouraged European producers to export more polymers, thus enabling producers to prevent significant physical volume overhang in Europe, Djelal explained.
Despite the rosy outlook from downstream consuming industries, producers, traders and end-users remain watchful. Several industry sources said that concerns among buyers are rising and cutbacks on purchasing behavior have emerged. Initial industry reports suggest manufacturers of household goods and toys in southern China curtailed orders for petrochemicals raw materials in the last week of April. Because Asia manufacturers are heavily dependant on exports to the European Union, the uncertain economic situation in the EU has prompted caution.
Petrochemicals are used to make plastic, rubber, nylon and other materials for consumer products, packaging, manufacturing, construction, pharmaceuticals, aviation, electronics and nearly every commercial industry. The PGPI is as price reference, a gauge of sector activity, and a measure of comparison for determining the profitability of selling a crude barrel intact or refining it into products. First published by Platts in August 2007, the PGPI peaked at $1,679/mt on July 14, 2008 before plummeting to a low of $491/mt on December 5, 2008, on the heels of the global financial meltdown.
Platts Global Petrochemicals Index reflects a compilation of the daily price assessments of physical spot market ethylene, propylene, benzene, toluene, paraxylene, low density polyethylene (LDPE) and polypropylene as published by Platts and is weighted by the three regions of Asia, Europe and the United States. Petrochemicals are used to make plastic, rubber, nylon and other materials for consumer products, packaging, manufacturing, construction, pharmaceuticals, aviation, electronics and nearly every commercial industry.
The PGPI is anchored by Platts' robust and long-established price assessment methodology and is published daily in Platts Petrochemical Alert, a real-time news service, as well as in other Platts publications.
For more information on petrochemicals, visit the Platts website at www.platts.com. For Chinese-language information on petrochemicals and the energy and metals markets, visit http://www.platts.cn/. Platts petrochemicals experts are available for media interviews; consult Platts Media Center.
About Platts: Platts, a division of The McGraw-Hill Companies (NYSE: MHP), is a leading global provider of energy and commodities information. With a century of business experience, Platts serves customers across more than 150 countries. An independent provider, Platts serves the oil, natural gas, electricity, emissions, nuclear power, coal, petrochemical, shipping, and metals markets from 17 offices worldwide. Platts' real-time news, pricing, analytical services and conferences help markets operate with transparency and efficiency. Traders, risk managers, analysts, and industry leaders depend upon Platts to help them make better trading and investment decisions. Additional information is available at http://www.platts.com.
About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global information and education company providing knowledge, insights and analysis in the financial, education and business information sectors through leading brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2009 were $5.95 billion. Additional information is available at http://www.mcgraw-hill.com/.
SOURCE Platts
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