Global market fears hit Europe chem stocks as crude, naphtha plunge

LONDON (ICIS)–European chemical stocks fell on Thursday, in line with financial markets, tracking sell-offs in Asia, as investors lost confidence amid tumbling crude and naphtha prices and continued concerns over recovery in the global economy.

At 12:30 London time, the UK’s FTSE 100 was 1.83% lower than the previous close, Germany’s DAX had fallen by 1.81%, and the CAC 40 in France was down by 2.12%.

With European indices trading lower, the Dow Jones Euro Stoxx Chemicals index was down 1.36%, as shares in many of Europe’s major chemical companies fell from the previous close.

Petrochemical major BASF’s shares had fallen by 1.33%, while fellow Germany-based chemical company Bayer’s shares were trading down by 1.03%.

Shares in Germany-based fertilizer producer K+S and chemical firm Evonik were trading down by 1.79% and 2.00% respectively, while France-based Arkema’s shares were trading down by 2.53% from the previous close.

Norway-based fertilizer producer Yara International saw its shares fall by 0.88%, while Swiss Clariant’s shares were down 3.03%.

Weak global economic data, falling crude prices and subsequent naphtha drops have left investors nervous and unwilling to dive into the market.

US crude continued to trade near a two-year low, with prices down by more than $1.00/bbl on Thursday morning as a larger-than-expected build in the US crude stocks added to the growing concerns about the oversupply situation and weaker global oil demand.

Meanwhile, northwest European naphtha prices have fallen below the $700/tonne mark on the back of the unabated decline in oil prices. On Thursday, the cargo range dropped from the previous afternoon on weaker crude oil prices, with November swaps assessed at $671-673/tonne.

Adding to uncertainty, at the end of September EU statistics agency Eurostat announced eurozone inflation fell to 0.3% in September from 0.4% in August, fuelling fears that deflationary pressure on the region’s economic recovery may be becoming increasingly entrenched.

The spread of Ebola in western Africa and its possible impact on emerging markets has also weakened investor sentiment.

Meanwhile, Asia’s open-spec naphtha prices plummeted to the lowest level in more than four years at the close of trade on Thursday, ICIS data showed.

Prices for the first half of December nosedived to $686-688/tonne CFR (cost and freight) Japan following a deal done at $691/tonne for the second half of December, traders said.

At $686-688/tonne CFR Japan, the levels were the weakest since 24 September 2010, when prices closed at $680.50-682.50/tonne CFR Japan, ICIS data showed.