Prices decline for the third consecutive month in June in the global petrochemicals industry, causing the Platts Global Petrochemical Index (PGPI) to drop to US$1051/mt on June 30, the lowest level of 2010. Industry sources tell Platts the recent decline in petrochemicals prices can be traced to several factors, including a slow down in demand and over-production that occurred as manufacturers sought to capitalize on the run up in prices since January 2009. Between November 2009 and April 2010, the index continually increased, hitting a high of US$1262/mt on April 12. Since then, price movement has been downward with the average daily price of PGPI dropping 10.1% to US$1029/mt in June from US$1144/mt in May.
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 as published by Platts and is weighted by the three regions of Asia, Europe and the United States.
In Asia, market players struggled to cope with an influx of new supply, which put severe pressure on production margins in aromatics, namely benzene, toluene, and paraxylene. China, in particular, continues to grapple with high stockpiles of key petrochemicals, which suggests petrochemicals consumer outlook from traditional key importing regions of the United States and the Eurozone is weak. In Europe, an inflow of cheaper imports and the weaker prices in the world's energy complex kept benzene prices under pressure during June. And the availability of deep sea cargoes from the Middle East, the United States, and Latin America pushed down prices for olefins, such as ethylene and propylene. Despite the downward price trend in olefins and benzene prices, profitability for European steam cracker operators remained high in June at a monthly average of US$240/mt (€197/mt). These levels provided incentive for high utilization rates at steam crackers. European derivative polymer demand continued to surpass expectations, with most plastic application segments such as food and beverage, healthcare, automotive, and textiles showing incremental and consistent improvement.