Petchem sector 'an exception' in trying to hike prices - US Fed

29 July 2009 22:52  [Source: ICIS news]

Petchems among few to raise pricesHOUSTON (ICIS news)--The petrochemical industry was one of the few in the US actively trying to raise prices in the current economic climate, the Federal Reserve Board said on Wednesday.  

The Fed said gave its assessment in its Beige Book, a state-of-the-economy report it publishes every six weeks. The current report covers June and early July.

Prices in most industries, including manufacturing and retail, were flat or falling as sellers tried to lure buyers back to the market, the report stated. Petrochemicals makers “remained an exception”.

“Raw materials prices were mostly stable, but some contacts said higher fuel costs had squeezed margins,” the report stated.

Producers of everything from acrylonitrile-butadiene-styrene (ABS) to phenol have been pushing for price increases, usually on the basis of rising crude oil prices. Crude has been hovering in the $60s-70s/bbl this summer, up from the $30s/bbl earlier in the year.

Butadiene (BD) producers pushed through a 14 cents/lb increase for July contracts and are trying for another 15 cents/lb for August.

Buyers have fought back with arguments that slack demand forces them to keep prices lower.

Further upstream, US oil refineries were trying to increase production but were hampered by lack of retail fuel demand, the Fed said.

“Refineries increased their capacity utilization slightly over the past six weeks, but ... overall industry conditions remain weak because of low demand for fuels,” the report stated.

The Fed gave mixed signals on the amount of oil rigs operating in the Gulf of Mexico. The Fed’s Atlanta contacts said the number of rigs operating in the gulf had fallen by half year over year, while those in Dallas said the number of working rigs “was up slightly”.

Overall, the 12 districts that contribute information to the report said that the economy remained weak, but that most sectors appeared poised to make a comeback.

“Reports ... suggest that economic activity continued to be weak going into the summer, but most districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level,” the report stated.

($1 = €0.71)

Paul Hodges studies key influencers on the economy in his Chemicals and the Economy blog
To discuss issues facing the chemical industry go to ICIS connect

By: Ben Lefebvre
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