Larger US chemicals firms see the market turning around early next year

06-Dec-06

Spot ethylene prices plunged about 40% from a September peak to mid-November, due to a supply glut. After a tough Q4, that witnessed plummeting prices for the key building blocks of the plastics market, the biggest U.S. chemicals firms see the market turning around early next year, anticipating a very strong Q1. Price increases and margin expansion based on rapidly spiraling demand and very low inventories have been anticipated. Dow Chemical Co., in its outlook for ethylene report, that inventory levels suggest the market is "at or near an inflection point", as inventories dwindle after distributors stocked earlier this year, mindful of the devastation to Gulf Coast refineries during the 2005 hurricane season and the following surge in prices. However, calm weather in the season allowed petrochemical plants to be running at over 90% capacity. As the season progressed, stockpiles of petrochemical feedstocks such as naphtha and ethane found their way back into the market, driving down prices. The bearish factors are now set to reverse. AHouston-based provider of petrochemical pricing, has forecast polyethylene prices could improve by at least 15 cents a pound by January.