LONDON, Dec. 16, 2010 /PRNewswire/ -- Platts – The monthly average price of petrochemicals, as measured by the Platts Global Petrochemical Index (PGPI), was $1,194 per metric ton (/mt) in November, according to just-released data from Platts, a leading global energy and metals information provider. This is up 2.96% from October and the highest in seven months. The PGPI is a basket of seven widely-used petrochemicals.
The November average PGPI price, up 18.92% versus the same period a year ago, was the highest since April when the monthly average PGPI was $1237/mt. The PGPI rise was largely attributable to higher prices in the upstream energy complex and a jump in ethylene prices worldwide.
"However, the rise in petrochemical prices is expected to taper going forward because demand traditionally slows at year end in response to stringent inventory management," according to Ihsan Rahim, Platts managing editor, petrochemicals, Americas.
Spot ethylene prices, which rallied 11 cents per pound (/lb) in November to more than 50 cents/lb on news of temporary production disruptions at Williams, Ineos and Chevron Phillips, drove the broader PGPI upward by giving a lift to other petrochemicals derivatives such as styrene. Ethylene price gains, alongside the gas feedstock advantage in the United States, allowed U.S. producers to realize notable profits, with margins climbing to more than 23 cents/lb ($507/mt), well eclipsing those of Europe.
Higher prices in Dated Brent crude pushed European petrochemical prices upward in the second half of November. According to Platts data, a 2.4% hike in November Dated Brent crude oil prices helped feed a 3.4% price jump in European naphtha (the principal feedstock to petrochemicals). As a result, steam cracker margins, a measure of profitability for olefin producers, fell 21% in November to an average of $103/mt.
"It does not make sense to produce the last layer of ethylene," one olefin producer told Platts. "We are very diligent not to produce extra volume now." This view was echoed by other producers. "Cracker margins are miserably low now and while we continue to run our crackers at a good utilization rate, as ethylene and propylene demand remains high," another olefin producer said.
However downstream demand for petrochemical products remained healthy, sources said. While many downstream markets were cautious of their year-end working capital, thin inventories through the production chain are said to have sustained decent consumption rates.
Ethylene spot prices in Northeast and Southeast Asia gained 11.22% and 9.34% respectively in November, as compared to a 9.73% and 7.7% drop in October, due to lower production on tight naphtha feedstock supply. China's National Development and Reform Commission in late November ordered state-run Sinopec and PetroChina to address diesel shortages in the country by reducing production of naphtha and enhancing production of diesel. This led to a surge in ethylene prices. "Downstrem polyethylene producers in China and Taiwan bid up prices in an effort to secure feedstock," said Asia deputy managing editor Chua Sok Peng.
The Platts Global Petrochemical 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. It is utilized as a 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.
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