Today's Trends: Petrochemicals Index Rallies Late in July

Platts' Global Petrochemical Index (PGPI) finished July slightly higher at $1,042/metric tonnes after prices in the global petrochemicals business firmed in the second half of last month.

PGPI, a basket of petrochemicals prices expressed in dollars per metric tonne (mt), was up $27/mt at the close on July 30 from the June 30 close of $1,105/mt. The PGPI had been trending lower since mid-April. Despite the higher closing value for July, the average PGPI price on a daily basis last month was $1,009/mt, or a two percent decline from June's daily average of $1,029/mt.

"The current debate is whether the price uptick is a harbinger of a return to the early-year uptrend or whether it's a temporary hiccup," said Shahrin Ismaiyatim, Platt's global editorial director of petrochemicals. "Petrochemical bears attribute the July rise to little more than a relief rally after three months of declines, fueled by short-term restocking, inventory building and seasonal adjustment. Others are more optimistic, encouraged by indications of increased demand."

Petrochemical demand continued to rise in China and Asia as a whole, driven by key consumer segments such as automobiles. Asia prices for styrene monomer, a key feedstock that goes into the making of acrylonitrile-butadiene-styrene used in automobile components, surged seven percent in July or $71/mt.

Asia petrochemical prices also were kept higher in July by prospects of near-term supply deleays after a fire on July 7 forced Formosa Petrochemical to shut its 700,000 mt/year naphtha-fed steam cracker after a fire broke out at the plant.

In Europe, petrochemical prices were lower due to trans-regional supply inflow. Historically, European petrochemical prices are lower in the summer months, but this year's downturn is less pronounced than normal and inventory in the production pipelines are low due to steady product demand. Consumer confidence has resulted in many European packaging companies having full order books in September.

U.S. petrochemical producers are seeking to recover the costs of production , and are trying to push forward prices despite a weak consumer market. Weak U.S. housing sales, low consumer confidence and a feeble equity market will provide unstable bases for economic recovery or an uptrend in petrochemical prices, making it unclear whether underlying demand for plastics-related products will be sustained.


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