IPEX shows petchem and plastics markets reacting to crude swings

LONDON (ICIS)–Petrochemical markets in Asia have reacted swiftly to recent rising crude oil and naphtha prices, while the European and US markets are still feeding through the sharp crude price downturn of the past six months, ICIS data showed on Thursday.

The ICIS Petrochemical Index (IPEX), which represents a capacity-weighted basket of 12 primary petrochemical products, fell by 1.4% in February from January 2015*. The index is down by 37% from February 2014 and is 36% lower than in August 2014, when crude oil prices began to fall dramatically.

The average Brent crude price was $58.16/bbl in February 2015, down from an average of $109.89/bbl in February 2014. On the same basis, WTI crude was at $50.72/bbl in February, down from $100.75/bbl the year before.

Crude prices began to drop in August last year, prompting steep falls in the price of the petrochemical industry’s primary liquid feedstock, naphtha. However, a rally in crude prices which began at the end of January 2015 has yet to feed fully into prices for the major petrochemicals, given the time lag for costs to pass along the primary petrochemical product chains.

Spot price-driven markets in Asia reacted quickly to the uptick in crude in February. The sharpest increases were in prices for propylene, ethylene, benzene and their derivatives. Contract paraxylene (PX) prices continued to fall in an oversupplied market. PX is a feedstock for the polyester cloth and polyethylene terephthalate (PET) bottle industry.

Petrochemical price movements in the US were mixed, although prices rose for the products most directly linked to oil. Ethane and other natural gas liquids (NGLs) predominantly produced from shale gas are the preferred feedstock for many petrochemicals in the US.

Prices have been lower since the second half of last year, and in February were at 16.50-20.50 US cents/gal. The below chart detailing US IPEX, WTI and Henry Hub natural gas prices illustrates the cost advantage US petrochemical producers cracking ethane can achieve. (Ethane prices in the US are related to those for natural gas).

Petrochemical prices in Europe have been falling with lower crude and naphtha costs and generally continued to drop in February – often significantly. Prices for some commodities rolled over in the quarter in euro terms, but were lower in US dollars.

Europe ethylene and propylene prices dropped by more than the equivalent of $100/tonne in February. Polyolefin prices fell by a greater amount. At the end of January, Europe spot pipeline ethylene prices were at a five-year low.

Naphtha prices in Europe in February were $511/tonne on average – 44% lower than in February 2014. 

Published at the beginning of each month, the IPEX provides an independent indicator of average change in world petrochemical prices.

The IPEX product basket of 12 essential petrochemical products comprises ethylene, propylene, butadiene (BD), benzene, toluene, PX, styrene, methanol, polyvinyl chloride (PVC), polyethylene (PE), polypropylene and polystyrene (PS).

Dating back to January 1993, historical ICIS prices for these products in the US, western Europe and northeast Asian markets have been weighted by regional nameplate capacity to generate the monthly index value.

*The January IPEX has been revised to 214.01 from the number published originally, and is based on settled January contract prices for ethylene, styrene and PVC in the US and paraxylene (PX) and styrene in Asia.

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