25 September 2007 17:55 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Slower demand growth for chemicals coupled with rising feedstock and energy costs could accelerate the industry into the next downturn.
The message is loud and clear that oil above $80/bbl will have an impact on a sector that has done so much to lift efficiencies and cut costs – and one that has been hugely successful at pushing higher feedstock costs further down the chain with higher prices.
Plastics converters and the host of chemical industry customers one step closer to manufacturing have borne the brunt of costlier chemicals. The big question is for how much longer?
Chemicals players currently have to rely on strong demand pull to buoy prices so warnings of the fragility of continued demand growth have to be taken seriously.
As the price of oil hovers around $80/bbl and threatens to move higher, minds are concentrated on just how much more margins might be squeezed.
Polymer producers in ?xml:namespace>
The credit ratings agency has Basell, INEOS, SABIC and SABIC
Initial ethylene settlements were reported on 21 September at €945/tonne ($1,331/tonne) FD (free delivered) NWE (northwest
The increase was based on tightness in the European market and the recent sharp increase in upstream naphtha costs, which breached $700/tonne CIF (cost insurance, freight) NWE last week to hit a high not seen since May.
Both polyethylene (PE) and polypropylene (PP) prices appear to have peaked this quarter, however, and look set for a correction in the fourth quarter although higher priced oil and naphtha may have put a stop to that.
Many converters in
Polymer supply in Europe has been tight this year and margins have held up but European prices are expected to come more in-line with Asia and
Undoubtedly tight supply/demand balances are underpinning the sector in
The most difficult driver to call for the sector currently is demand growth but the on-going credit squeeze is expected to have some negative economic impact.
Couple somewhat slower downstream demand for petrochemicals and polymers with still higher feedstocks and energy costs and you have a recipe for a more difficult market environment.
That environment gets tough when new low cost capacities in the
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