Platts: Rate of Decline in Petrochemical Prices Picks Up Pace in May

LONDON, June 11 /PRNewswire/ -- Platts – In May, prices fell at a faster pace in the $3 trillion global petrochemicals market with the average daily price of Platts Global Petrochemical Index (PGPI) dropping 7.5% from $1,237 per metric ton (/mt) in April to $1,144/mt. The index, a basket of the most widely-used petrochemicals prices published by Platts, a leading global energy information provider, had been falling since mid-April. The PGPI hit a six-month high of $1,262/mt on April 12, before falling to $1,064/mt by May 28.

"The April price downturn in olefins, the primary building blocks to most petrochemicals, passed through to aromatics and polymers in May signaling lower input costs for things like plastics, rubber and nylon," said Shahrin Ismaiyatim, Platts global editorial director of petrochemicals. But short-term market action suggests market volatility appears to be the petrochemical industry's only constant in the second quarter.

There were only two days in May that spot prices posted gains over the previous trading day's close. Petrochemicals took their pricing cues in large part from macro-economic and geopolitical factors during a turbulent month, noted Ihsan Rahim, Platts managing editor for Americas petrochemicals.

The 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 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.

Americas

"In the Americas, lower physical delivery contract prices for key petrochemicals settled down in May and moved with the tide of dropping spot prices for chemical feedstocks," Rahim said. The June U.S. benzene physical contract tumbled 57 cents to an initial settlement price of $2.95 per gallon, setting the stage for a drop in European prices. Meanwhile, U.S. steam cracker operators saw margins shrink as spot ethylene prices extended losses from April, while the monthly average for feedstock ethane prices was almost identical to April.

Asia

In the Far East, weak fundamentals saw the majority of Asian petrochemical prices slumping to year-lows in the second-half of May, with all three key aromatics suffering double-digit losses by the end of the month. Aromatics are the most actively traded petrochemicals and are used in a wide variety of applications including gasoline blending, pharmaceuticals, plastic manufacturing, and refrigeration. Asian benzene prices lost nearly 15% of their value between May 17-21, while Asian toluene dropped a similar 15.23% in the same time period.

Sizable losses were also seen in the Asian olefins sector (feedstock chemicals including ethylene and propylene which are used for the ubiquitous plastics industry and many every day products.) Propylene slumped 19.3%, while the Asian ethylene market declined 23.8%. Sources described the plummet in spot prices as "inevitable," given the phobia among end-users on holding excess feedstock.

"Industry players are nervous about the prospect of a free fall in prices reminiscent to the scenarios in end-2008 and early-2009, when the financial tsunami hit global markets, and Asian trading houses closed en-masse," said Quintella Koh, Platts managing editor for Asia petrochemicals.

Europe

In Europe, it was a softer crude oil and gasoline environment that spawned a pronounced decline in the aromatics complex, but polymers held to their uptrend, according to Ilana Djela, Platts managing editor for European petrochemicals. May's month-on-month loss in European benzene was the most prominent at 11%, outpacing the drop in Eurobob gasoline by 1%. However, European polymers were sheltered from negative bias and finished May to the upside, aided by tight inventories, persistent supply issues and stable demand.  

The PGPI serves as a 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.  It is based on Platts' long-established price assessment methodology and published daily in Platts Petrochemical Alert, a real-time news service, as well as in other Platts publications.  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.

For more information on petrochemicals, visit the Platts website at www.platts.com.  

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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