By Nigel Davis
LONDON (ICIS)--Significant price volatility for some petrochemicals over the past few months has overshadowed steadier trends more closely related to crude oil and overarching market direction.
Data show, however, that petrochemical prices are under pressure from lower-priced crude. That is likely to make it more difficult for producers to hold on to still strong margins relative to naphtha and natural gas liquids (NGLs) in the second half.
The latest ICIS Petrochemical Index (IPEX), which is based on a capacity-weighted basket of prices for 12 major petrochemicals and polymers, was down 2.6% month-to-month in June. On an annual basis, however, the global index remains 10% higher reflecting the relatively still strong price position for producers. The regional and global IPEXs and the date range can be selected from the graphic.
One cannot say that extreme price volatility is over but the massive price swings in butadiene in Asia and worldwide, and in propylene in the US, appear to have eased – or, at least, prices are back to where they were before the fly ups.
Olefins prices in northeast Asia and the US are shown in the charts.
Spot butadiene prices in northeast Asia have plunged by around $2,000/tonne from earlier this year, having swung up sharply in 2016 on tightness and natural rubber futures market sentiment. The price swings in the US and Europe were also significant – 30% in the US up and then down.
Propylene has been tight in the US and demand strong but a better market balance has helped bring prices back down closer, in relative terms, to the other olefins. Naphtha based petrochemical producer (the few of them) margins in the US had been buoyed by the value of propylene, butadiene and aromatics streams available from the cracker.
Crude prices were dropping at the end of May and fell throughout June, and were clearly influencing prices for the major petrochemicals over the month. The IPEX tends to follow crude with a lag of a few weeks based simply on the fact that most of the petrochemicals in the basket are derived from naphtha.
Each of the regional indexes tracked lower in June: the US index down 1.8% month to month; the northwest Europe index down 2.7%; and the northeast Asia index down 3.1%.
Prices in the petrochemical markets in northeast Asia have plunged over the past six months. The northeast Asia index is down 23.5% between January and June. The US index is down 1.2%. The June northwest Europe IPEX is up 8.5% on January, a fact which reflects the strength of the first half in price terms from Europe’s producers compared with the second half of 2016.
The major price movements in the current month were for butadiene in northwest Europe and northeast Asia, down 18.4% and 15.7% respectively, and ethylene in northeast Asia (-13.8%), toluene in the US (-8.7%) and ethylene in the US (-8.3%).
Prices for propylene and polypropylene in June rolled over from May. There were also rollovers for US styrene and polystyrene and from northeast Asia polyvinyl chloride (PVC).
The 12 petrochemicals and polymers in the basket are ethylene, propylene, butadiene, benzene, toluene, paraxylene, styrene, polystyrene (PS), polyethylene (PE), polypropylene (PP), methanol and PVC.