Platts Global Petrochemical Index (PGPI) Averaged $1,159/mt in October, Up 5.65%

LONDON, Nov. 10, 2010 /PRNewswire/ -- Platts – The monthly average price of petrochemicals, as measured by the Platts Global Petrochemical Index (PGPI), a basket of seven widely-used petrochemicals expressed daily in dollars per metric ton ($/mt), was $1,159/mt in October or up 5.65% from September, according to Platts, a leading global energy and metals information provider.

The October rise is attributed to late third-quarter currency fluctuations, increased synthetic fabric production, and higher prices in the upstream energy complex. October's average monthly PGPI price is up 23.43% versus a year ago monthly average price was measured $939/mt.

Americas

In the United States, one petrochemical producer told Platts, "There hasn't been any more demand ... the gains in crude (during the first weeks of October) are because it's taking more dollars to buy a barrel. It's simple inflation."

However, analysis of the downstream end-use customer activity indicates that customers drew-down inventories in September and October, according to Ihsan Rahim, Platts petrochemicals managing editor for the Americas. "Combine this inventories draw down with rising feedstock prices like ethane, and one can conclude that the October rise in U.S. petrochemicals prices was following classic supply-demand economics."

By the end of October, U.S. contracts for key olefins and aromatics, the building blocks for all other chemicals and resins, were increasing across the board as more active and rising spot prices distanced themselves from the more sluggish monthly contract prices and buyers rushed to secure supply as talk of double-dip economic recession has been silenced.  

Petrochemicals, a $3 trillion global business, are used to make plastic, rubber, nylon, other consumer products and are utilized in manufacturing, construction, pharmaceuticals, aviation, electronics and nearly every commercial industry.

Asia

In Asia, soaring cotton prices prompted a demand push for polyester and other cotton substitutes, which gave lift to paraxylene (PX), which is the major ingredient for polyester feedstock purified terephthalic acid (PTA). According to Platts price assessments, PX prices delivered on a cost-plus-freight basis to China increased by $183/mt, or 17% to $1,248/mt from beginning to end month. The fact that PTA futures prices on the Zhengzhou Commodity Exchange were halted for several days after rising the 4% allowable daily limit in early November suggests paraxylene prices will continue to firm near term. Other petrochemicals in the aromatics group such as toluene and benzene were also firm in October.

Europe

In Europe, strong material and import supply as well as already high steam cracker utilization rates caused profit margins for olefins to wane during the first half of October. However, the softening in olefin prices was short-lived as strikes over pension reforms in France led to temporary but severe supply interruptions across the production chain in Europe. Production shutdowns at French refineries and steam crackers sparked a run up in olefin prices, which caused a broader petrochemicals price firming by late month.

Still, steam cracker margins, a measure of profitability for olefin producers, fell by 40% in October, averaging $130/mt, driven in part by a price rally in the upstream energy complex. Higher Dated Brent values pushed the October price average for European naphtha (principal petrochemical feedstock) to $755/mt (cost, insurance and freight delivered to northwest Europe. This was up 11% from September. European polymer markets were bearish for most of October as weaker dollar facilitated a flow of imports into Europe. However the gains in the energy complex and dents in integrated margins led polymer producers to adopt a tough pricing policy heading into November. Downstream demand for polymer products remained stable at good levels, industry sources said.

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. 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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SOURCE Platts