HOUSTON (ICIS)--Spot prices for chemicals fell around the world on Monday as stock markets crashed and as oil plunged.
The double whammy of slumping upstream values and investor panic hit petrochemical markets that had already been sinking because of the economic impact of the coronavirus (Covid-19).
Oil prices are a leading indicator for downstream petrochemical markets because of their link to naphtha, the principal feedstock in Europe and Asia.
In some of the less liquid chemical markets, activity evaporated entirely as participants waited to see how far oil and stock prices will fall and how policy makers will respond.
If demand weakens and margins fall, some companies may lower operating rates, extend outages or shut down uncompetitive plants.
In the US, prices for ethylene, propylene and aromatics all fell.
Gasoline and jet fuel hit four-year lows. Some US refineries are postponing the restart of their fluid catalytic cracking (FCC) units until April. These units produce gasoline and propylene.
In Latin America, petrochemical markets will likely see the effects 30-45 days later, said George Martin, editor in chief - Latin America for ICIS. US Gulf petrochemical prices remain the benchmarks for Latin America and companies there will wait to see what happens there before they react.
In Europe, sentiment was bleak. Given the effects of oil and the coronavirus, chemical prices could fall as much as 20% in April, according to ICIS analysis.
Prices for naphtha and benzene fell by double-digit rates. Styrene prices declined by nearly 9%.
For polyolefins, European polyethylene (PE) market is on partial lockdown as players digest the latest shock, according to sources.
A sustained crash of crude oil and naphtha prices would favour European naphtha-based PE sellers over the US newcomers with their cheap ethane-based product, but demand remains a huge issue.
Toluene prices plumbed to their lowest since early 2009.
Sellers of ethylene failed to get bids for end March- and April-arrival cargoes.
Prior to Monday's declines, general petrochemicals pricing was already falling sharply in the US and northeast Asia in February, as shown in the ICIS Petrochemicals Index (IPEX).
Looking ahead, stock markets point to more challenges.
The Dow Jones Industrial Average and the S&P 500 each fell by nearly 8% on Monday. Stocks for several US-listed companies fell by double digits. Dow stock fell by more than 20%.
Additional reporting by Judith Wang, Linda Naylor, Anne-Sophie Briant-Vaghela, Ignacio Sotolongo, Alex Snodgrass, Adam Yanelli, Deniz Koray, Tom Brown, Ran Cheng, Yoyo Liu, Veronica Zhang, Judith Wang, Pearl Bantillo
Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
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