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Today's Trends: Petrochemical Prices Decline Three Months in a Row

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Prices in the $3 trillion global petrochemicals business declined for the third consecutive month in June, causing the Platts Global Petrochemical Index (PGPI), a basket of petrochemicals prices expressed in dollars per metric ton ($/mt), to drop to $1,051/mt on June 30, the lowest level of 2010.

Industry sources told 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.

"The drop off in the prices of these industrial raw materials is beginning to raise eyebrows in the analyst community, with many questioning if they're suggestive of a double dip for the economy," said Shahrin Ismaiyatim, Platts global editorial director of petrochemicals. "Some analysts look at indices like PGPI to predict economic trends and for the last couple months it looks like "petchem" feedstock price declines and economic slowdown have come hand in hand."

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.

Between November 2009 and April 2010, the index continually increased, hitting a high of $1,262/mt on April 12. Since then, price movement has been downward with the average daily price of PGPI dropping 10.1% to $1,029/mt in June from $1,144/mt in May.

"Volatility defines this market and June was the most volatile month for petrochemical prices in 2010, with swings in the PGPI varying from a $15.72/mt overnight drop on June 6, to a $4.96/mt gain on June 14," said Ihsan Rahim, Platts managing editor for Americas petrochemicals. By comparison, the average daily price movement during the January-through-June period was $0.70/mt.

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.

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