19 July 2011 17:17 [Source: ICIS news]
By Nigel Davis
Companies in most regions were able to balance additional costs with prices and reap the benefits of still relatively robust demand, at least until the end of May, when high olefin prices clearly began to bite
So financial results from the major players for the quarter and certainly the first half comparably should look good. The question will be how the sequential quarter-to-quarter financials pan out.
Analysts will also be poring over views on the outlook given the current pressure on the
Increasingly, it is market sentiment in
In the second quarter, the Asia markets proved the exception in terms of on-going profitability, as demand from
The sharp decline in petrochemical prices in Europe and
ChemSystems says that feedstock costs remained a major concern in the second quarter.
Crude oil prices rose on continued political unrest in the Middle East and
Brent free on board (FOB) crude oil prices averaged $119/bbl (€84/bbl) in April and May, more than 13% higher than the first quarter average, and naphtha prices topped $1,000/tonne. LPG processing was attractive from a price perspective, but not given the high value of propylene and C4s.
Yet tight olefins markets pushed contract prices to record highs.
“Strong olefin markets supported margins at the cracker, preserving [the] profitability of integrated producers,” the consultants say. “Meanwhile, [the] average profitability of the South Korean industry fell to a six-quarter low as markets lengthened considerably, with derivatives hard to place in
The consultants’ quarterly report highlights not only the distinct regional nature of the petrochemical industry, but also its global interconnectedness.
Weaker demand in
Markets in the
The weaker demand picture in
ChemSystems’ snapshot view highlights the fact that the strong second quarter performance in Europe and the
“Most of the margin continued to be captured at the cracker, with [the] profitability of non-integrated operations being severely squeezed,” the analysts added.
This will colour the performance of sector players, depending on how integrated or exposed to the weaker products they are.
Record high olefins prices hit the profitability of intermediates and polymers, and weaker demand for some of these materials came as a direct result of high prices.
So while naphtha cracker margins in
The firm’s report highlights the wide differences in performance achieved from sector businesses. It underlines the factors that have contributed to another strong quarterly performance – and those that have undermined the sustainability of those returns.
($1 = €0.71)
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