Platts Global Petrochemical Index (PGPI) Ended July Higher on Late Rally
July PGPI Closed up $27/mt from June, But Month-on-Month Daily Average Fell 2%
LONDON, Aug. 11 /PRNewswire/ -- Platts -- Prices in the $3 trillion global petrochemicals business firmed in the second half of July, causing the Platts Global Petrochemical Index (PGPI), a basket of petrochemicals prices expressed in dollars per metric ton ($/mt), to close the month slightly higher at $1,042/mt. Petrochemicals are used to make plastic, rubber, nylon, other consumer products and are utilized in manufacturing, construction, pharmaceuticals, aviation, electronics and nearly every commercial industry.
The PGPI at the close on July 30 was up $27/mt from the June 30 close of $1,015/mt, according to data just released by Platts, a leading global energy and metals information provider and publisher of the index. The PGPI had been trending lower since mid-April.
Despite a higher closing value for July, the average price of the PGPI on a daily basis during the month was $1,009/mt, or a 2% decline from June's daily average of $1,029/mt. Also, the one-day July 30 rise of $9.5/mt, while note worthy, was much less in magnitude than the $15.72/mt decline seen on June 4.
"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, Platts 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."
The PGPI 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.
“Taiwan grabbed most of the spotlight in July as industry players fixated on regular status updates on Formosa Petrochemical's high-profile plant fires,” said Quintella Koh, Platts managing editor of petrochemicals, Asia. On July 7, Formosa Petrochemical was forced to shut its 700,000 mt/year naphtha-fed steam cracker after a fire broke out at the plant. The company later said that losses incurred due to the fire are estimated at NT$500 million ($15.61 million). While the industry initially treated the fire news as a “wait-and-see” situation, the supply delays quickly infiltrated the market's thinking and kept regional prices higher in than they might otherwise have been, according to sources.
For China and Asia as a whole, petrochemical demand continued its rise, driven by key consumer segments, such as automobiles. Prices in Asia of styrene monomer -- a key feedstock that goes into the making of acrylonitrile-butadiene-styrene (ABS) used in automobile components -- surged seven percent in July, or $71/mt. According to Platts' price assessments, the July 30 closing price of styrene (including freight costs) was $1,093.50/mt.
While demand and prices were higher in Asia, European petrochemicals prices were lower, pressed by trans-regional supply inflow. Prices of European olefins such as ethylene and propylene, used in the making of plastics, fell by 8% and 7%, respectively. A similar price decline occurred in European benzene prices. Benzene, toluene and paraxylene -- collectively known as aromatics -- are used to make consumer products such as plastic packaging, casings for electronic goods, polyester fibers and as a blend stock for gasoline.
Historically, European petrochemical prices tend to drop in the summer months. However, this year's downturn is less pronounced than normal and inventory in the production pipelines are low amid steady product demand. Many European packaging companies have already reported full order books into September, citing healthy consumer confidence.
In the United States, petrochemical producers seeking to recover the costs of production continued to try to push forward price increases despite a weak consumer market. "Price increases may be the latest industry mantra, but it's not yet clear that underlying demand for plastics-related products will be sustained," said Ihsan Rahim, Platts managing editor for petrochemicals, Americas. He cited downside pressures such as a floundering U.S. housing sales, low consumer confidence and a feeble equity market, each of which provide an unstable base for economic rebound or up-trending petrochemical prices.
The PGPI is utilized as price reference, a gauge of sector activity, and a measure of comparison for determining the profitability of selling a crude barrel intact or refining it into products. First published by Platts in August 2007, the PGPI peaked at $1,679/mt on July 14, 2008 before plummeting to a low of $491/mt on December 5, 2008, on the heels of the global financial meltdown.
Published daily in Platts Petrochemical Alert, a real-time news service, and other Platts publications, the PGPI is anchored by Platts' robust and long-established price assessment methodology and the firm's 100-year history of energy price reporting. For more information on petrochemicals, visit the Platts website at www.platts.com. For Chinese-language information on petrochemicals and the energy and metals markets, visit http://www.platts.cn. Platts petrochemicals experts are available for media interviews, consult Platts Media Center.
About Platts: Platts, a division of The McGraw-Hill Companies (NYSE: MHP), is a leading global provider of energy and commodities information. With a century of business experience, Platts serves customers across more than 150 countries. An independent provider, Platts serves the oil, natural gas, electricity, emissions, nuclear power, coal, petrochemical, shipping, and metals markets from 17 offices worldwide. Platts' real-time news, pricing, analytical services and conferences help markets operate with transparency and efficiency. Traders, risk managers, analysts, and industry leaders depend upon Platts to help them make better trading and investment decisions. Additional information is available at http://www.platts.com.
About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global information and education company providing knowledge, insights and analysis in the financial, education and business information sectors through leading brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2009 were $5.95 billion. Additional information is available at http://www.mcgraw-hill.com.
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