Corrected: INSIGHT: ICIS data show strong petchem price and margin gains in 2010

28 January 2011 17:15  [Source: ICIS news]

Correction: In the ICIS story headlined: "INSIGHT: ICIS data show strong petchem price and margin gains in 2010" dated 28 January 2011, please read on the legend to the second chart ... NE Asia (Naphtha, spot, US$/t) ... instead of ... NE Asia (Naphtha, contract, US$/t) ... a corrected story follows.

By Nigel Davis

LONDON (ICIS)--Petrochemical producers are expected to post strong profits for the fourth quarter of 2010, despite a seasonal slowdown and much improved full year figures. ICIS price and margin data underpin the assumption and point to a banner year for most firms.

US analysts see significant year-on-year earnings gains for companies such as Dow Chemical, LyondellBasell, Georgia Gulf and Westlake. The major producers report fourth quarter and full year results in late January and next month. To date, India’s Reliance Industries, ConocoPhillips and sector giant SABIC have posted strong year-on-year gains. Reliance Industries reported on its fiscal third quarter which ended on 31 December 2010.

Oil major ExxonMobil reports on Monday 31 January and Shell and Dow Chemical on Thursday 3 January.

ConocoPhillips’ CPChem joint venture with Chevron said this week that it had benefited from significantly improved ethylene (C2) margins in the fourth quarter. The US energy major’s chemicals segment income more than doubled to $118m (€86m), from $54m in the same period in 2009.

Currently, the petrochemical industry remains on a roll, with product prices in Europe and in Asia approaching new highs. The ICIS IPEX global price index at the end of 2010 and the start of this year has tracked close to the level last seen in early 2008.

ICIS cracker variable margin data also show how strongly olefins producers have been performing, particularly in Europe, driven by high cracker co-product credits.

The margins generated on ethane cracking in the US have remained high, underpinned by favourable gas feedstock costs. Naphtha cracking margins weakened in the fourth quarter but there was some support from firmer propylene and other co-product prices.

Petrochemical producer profit margins are likely to have reached a high point in the third quarter of 2010 with a seasonal contraction in the final three months of the year and a margin contraction brought about by higher feedstock costs.

Volume demand is expected to have declined somewhat in quarter four although the demand pull from China and from the emerging economies is likely to have been strong.

Fourth-quarter and full-year 2010 ethylene production in Europe was sharply higher year on year, data from the Association of Petrochemical Producers in Europe (APPE) showed this week, although volumes were not back to 2004 levels. Ethylene output was up 8.1% at 20.28m tonnes with propylene production up 5.6% at 15.03m tonnes and butadiene up 14.7% at 2.08m tonnes, APPE said.

IPEX January 2011

The ICIS Petrochemical Index (IPEX) broke the 300 mark in January for the first time since the end of 2008 when it hit a record. And in January 2011, the index was up yet again, by 2.2% on December 2010.

A regional breakdown of the index shows prices tracking higher in all regions in the second half of 2010, with prices in Europe largely ahead of those in Asia and the US.

Regional cracker margins 2009-10

ICIS data show European naphtha-based cracker variable margins improving in the second and third quarter of 2010 but declining in the fourth quarter of the year.

US ethane-based cracker margins improved somewhat in the fourth quarter compared with the third quarter and were higher than the liquids-based cracker margins generated in Europe for the first time in 2010. The data are based on US$/tonne product prices and average quarterly exchange rates.

Northeast Asia naphtha-based cracker margins dropped quarter to quarter in 2010 but were stronger over the course of the year than in 2009.

US ethane vs naphtha cracker margins

The ICIS variable margin data also illustrate the advantage that can be gained from cracking ethane feedstock in the US compared with naphtha, particularly in 2010 at a time of rising crude oil and naphtha prices.

Read Paul Hodges Chemicals & the Economy blog
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By: Nigel Davis
+44 20 8652 3214

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