INSIGHT: January prices higher but NE Asia IPEX growth slows

LONDON (ICIS)–Chemical prices continued to climb in January, with the ICIS Petrochemical Index (IPEX) improving strongly from December. Price levels generally are above those before the slump and, increasingly, before the petrochemical industry started on its cyclical, largely capacity-driven, downturn.

The ICIS data show commodity petrochemical and polymers prices for the product chains rising in the latter part of last year following the steep coronavirus lockdowns driven slump which bottomed out in April.

Progress was made in the latter part of the year, particularly, with production constraints and changed buying behaviour helping to underpin price levels and, for most products, drive increases.

China inventories rose strongly in the second half of 2020 as industry geared up, but market offtake did not necessarily follow suit. China relies so heavily on exports that its chemical and other manufacturers are struggling against weak and disrupted (due to logistics constraints) export demand.

The questions arising now are about how domestic demand in China will hold up after the Lunar New Year celebrations and through the second and subsequent quarters of 2021.

The global IPEX was up 3.1% in January, reflecting strong month on month growth for the northwest Europe and US Gulf components of the index. The NE Asia IPEX climbed just 0.4% reflecting the growing regional pressure on prices and softer market conditions.

These are uncertain times, and it is as easy to suggest that a turning point is being reached in NE Asia as it is to suggest that market momentum continues to carry prices in northwest Europe and the US Gulf.

Certainly, in the latter two regions, availability is keeping some markets tight. There are strong positive messages on demand in some markets while in others, the outlook is much more mixed.

The ICIS China Petrochemical Index, based on a basket of 17 prices, was up strongly again at the end of January with seven product registering double digit percentage point price gains month in month and six products down.

Looking at the year on year IPEX comparisons, it does appear as if Europe has some way to go to catch up with the rest of the world while the comparisons for the other regions are strong.

The price comparisons data show the gains that have been made in benzene, ethylene and propylene prices in most markets over the past two years – the slider on the interactive chart allows month to month comparisons to be made.

Polyethylene price are much higher as is polypropylene – significantly in the US. Methanol prices are much improved while paraxylene prices are close to a third lower in the three IPEX regions.

The cyclical upturn in most markets has been driven to a great extent by supply constraints – or less than expected supply growth – as well as somewhat stronger demand.

American Chemistry Council data published on Tuesday showed that global chemical industry capacity utilisation was up 1.5 points to 86.0% in December.

That is up from 82.1% last December and back towards levels seen a few years ago. It has closed in on the long term (1987-2019) average of 86.3%.

December production growth was not quite as strong as in November, the Council’s Global Chemical Production Regional Index (CPRI) shows. Chemical production increased in most regions in December, apart from Latin American.

The ACC notes that headline global production was up 6.8% year over year on a three-month moving average basis. Global output was 126.7% of the average 2012 level.

Insight by Nigel Davis