ICIS IPEX pointing to global price collapse
London, 8 August 2022 – The monthly ICIS Petrochemical Index (IPEX) is recording a collapse in commodity petrochemical and polymer prices worldwide as economic and cost pressures for the sector mount.
The leading indicator points to further price falls to come and significant downward pressure on margins at some of the world’s major chemical companies.
China’s stumbling economy – stricken by COVID-lockdowns – as well as the war in Ukraine and looming recession have put intense pressure on commodity prices, which have begun to fall sharply in the major petrochemical and plastics producing and consuming regions of the world.
The monthly IPEX shows prices have dropped most sharply in North-East Asia and have been under intense pressure in northwest Europe and in the US as well. Three regional sub-indexes comprise the global index, which fell 8%. The indexes are based on prices of 12 commodity petrochemicals and polymers weighted by production capacity as measured by the ICIS Supply and Demand Database.
“The collapse in petrochemical prices worldwide is ongoing,” said Nigel Davis, Insight Editor at ICIS. “Some contracts for August have been settled already and are down sharply month on month. The price collapse which began in Asia is spreading around the world.”
The latest monthly IPEX mostly charts July contract prices in the three regions. August contract prices for the key aromatic petrochemicals benzene and toluene have suffered steep falls, reversing strongly gains in recent months on tight availability. Disruptions in the refined products markets for gasoline and other fuels in North-West Europe, brought about by sanctions imposed on refined products imports from Russia due the war in Ukraine, had limited the supply of aromatics for chemicals use.
Aromatic petrochemicals are used to make essential plastics, such as nylon, polystyrene and polyesters, flexible foams, such as memory foam used in bedding, and insulation for the construction and packaging industry. The reversal has come sooner than ICIS analysts had expected. “Benzene contract prices in both Europe and the US plunged in August as markets adjusted downwards from the upwards spike in spot prices seen in late June,” said ICIS Senior Analyst Rob Peacock.
“Spot prices had been declining throughout July on lower crude and gasoline prices, coupled with reduced demand. Demand from the gasoline market faded quickly in the US, and hence Europe dropped off faster because it was not leading the gasoline-led spike,” Peacock added.
Most petrochemicals and plastics volumes are traded globally on a contract basis. Alongside the monthly IPEX, a Spot Price index is produced each week for the same commodities.
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