Aromatics markets often lead petrochemical markets, and provide good insight into economic trends. This has certainly been true of PTA (terephthalic acid) and benzene over the past year.
PTA demand into polyester and PET is dominated by Asia: benzene’s wide variety of uses means it is a good proxy for industrial production in Europe. Recent developments have been very significant, as the chart highlights.
It shows the spread (difference) between benzene and naphtha in Europe (green line); and between PTA and naphtha in Asia (red). Naphtha is the oil-based feedstock for both products, and so the spread is the key measure for profitability:
- PTA spreads collapsed in H2 2008 due to the financial crisis, but then rallied to $650/t with China’s stimulus
- They then began a steady decline in H2 2013 as China introduced its New Normal policies
- They fell to zero in H1 2014, but have since managed to stabilise around $200/t
- Benzene spreads showed the same decline in H2 2008, but their rally was more volatile up to 2012
- Spreads actually went negative for a period in early 2009, and returned to this level in late 2011, having been as high as $500/t
- They then moved into the $300/t – $600/t range until a year ago, before declining and then rallying recently
Both products are thus highlighting underlying weakness in the global economy, with PTA also acting as an important leading indicator for the Asian economy.
How should companies and investors react to these developments? Should they sit tight, and wait for the storm to pass? Or should they develop new strategies to deal with a more difficult environment?
These are some of the key questions that will be debated at our 14th annual World Aromatics & Derivatives Conference in Amsterdam on 17 – 18 November. Co-organised as always with ICIS, we will benefit from the insight of key executives from the global industry including:
- Bayer MaterialScience’s Global Procurement head, Dirk Jan de With
- Dow Chemicals’ Corporate Chief Economist, Rafael Cayuela
- Investec’s Chemicals Analyst, Paul Satchell
- PwC’s Director, Deals, Don van Neuren
- Reliance Industries President, Strategy & Business Development, Harish Davey
- Shell Chemicals’ General Manager Kate Johnson, and Global Strategy Manager for Styrene and Aromatics, Herbert Le Lorrain