INSIGHT INTERACTIVE: October IPEX reflects differing spot/contract views, little direct crude oil influence

By Nigel Davis

LONDON (ICIS)–The rising oil price had little identifiable impact on petrochemical prices in October as volatility in certain markets heightened the differential between contract settlements and spot price movements, ICIS data showed on Tuesday.

Oil price movements tend to be reflected downstream in petrochemicals with a time lag of a few weeks but the ICIS Petrochemical Index (IPEX) for October was influenced more directly by supply and demand factors and significant swings in price for some products.

The global index value for the month dropped 0.9% but was 12% above the level of October last year.

The marginal fall in the global index reflected virtually no change in the regional index for northwest Europe.

The US index was 2.9% higher while that for northeast Asia fell 3.1%.

Markets in Asia were influenced by the China Golden Week holidays at the start of the month and the drop in the regional index reflects the pressure on prices before and after the break.

Butadiene (BD) prices remained the most volatile – they have been on a rollercoaster for close to a year.

Northeast Asia prices dropped 18.3%, according to the ICIS pricing data.

BD contract prices for the month in the US shot up by 23.8% and were 14.2% higher in northwest Europe – they have subsequently declined in November contracts.

In northeast Asia, BD market sentiment was weak going into the holidays. The market slump continued through the rest of the month with regional supply bloated by exports of China’s surplus domestic volumes. Typically, China is a net importer of the olefin.

By stark contrast, US October BD contract prices were settled up significantly at the start of the month based on earlier, higher prices and the increase in the October contract price in Europe.

Europe’s October BD contract price had also been agreed higher on costlier feedstocks and a tight supply/demand balance.

Supply constraints helped push up US propylene and benzene prices running counter to the more general flat price trend, certainly in Europe.

Ethylene prices were down marginally in the US, up slightly in Europe and 2.7% lower in northeast Asia.

Indeed, ethylene’s price trend in Asia was flat to down apart from in paraxylene (PX) where the monthly average price increase was 3.7%.

Some of the downstream polymer markets showed sharp differences in price direction for the month.

US polystyrene (PS) prices were up 2.9%, for example, while the October polystyrene contract price in Europe was down 3.1%.

The average polystyrene price decline in northeast Asia in October was 5.5%. The picture was similar in polyvinyl chloride (PVC) and less pronounced in polypropylene (PP).

US toluene prices were 5.2% lower in October.

The IPEX values represent the movement in monthly prices for 12 major commodity petrochemical and polyolefins: ethylene, propylene, benzene, toluene, styrene, butadiene, methanol, paraxylene, PVC, PS, polyethylene (PE), PP, each weighted for regional capacity.

Prices tend to be influenced significantly in each regional market by the moving oil price and particularly where naphtha price movements help determine contract prices for the major petrochemicals and, to a lesser extent, plastics.

Producers are eyeing the rising crude price and the reflection in naphtha and other liquid feedstock costs carefully.

They will be keen to pass on any oil-related cost increases rapidly downstream into olefins, aromatics and eventually to the major polymers in the current relatively tight global petrochemical market environment.

The IPEX values are subject to revision as some contract prices settle retrospectively.

October prices for US styrene and northeast Asia styrene are not yet agreed.

Download global and regional ICIS IPEX data here
View the full IPEX methodology here