The price uptrend in the US$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, has been edging higher in 2010 on stock replenishing, increased demand and strengthening crude oil values.
The PGPI peaked at US$1262/mt in the first half of April, before dropping 5.5% to close the month at US$1192/mt. This compares to the March closing price of US$1233/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 US$1237/mt, which is 2% higher than the average in March of US$1213/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.
In the Americas, on a monthly basis, April ushered in toppling key feedstock prices. Prices of olefins, plummeted, with ethylene losing almost 50% if its value. The collapse in US 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.
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. 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. Meanwhile in Europe, polymer prices continued to firm in April, responding to thinning supplies from most European producers. Lack of visible imports coupled with improving end-user demand in most plastic applications helped sustained sellers' higher asking prices. 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. 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.