Brazilian Pipiline Projects (142450 bytes)
The price peak of the current petrochemical cycle has passed.
A slide in prices is a response to new productive capacity in the Far East and China's imposition of a limit on petrochemical imports.
David Glass, director of Chem Systems Ltd., London, points out that July and August have seen a downturn after 6-9 months of prices "going crazy."
The price for ethylene in Europe fell to 850 deutschemarks ($607)/metric ton in the third quarter from 930 deutschemarks ($664)/metric ton in the second.
Polymer prices fell, too. Glass said this reflects lower demand and a strong deutschemark compared with the dollar.
He said, "Polymers led the industry as prices were on the way up. Now polymers are leading on the way down."
Polyvinyl chloride is down to 1.65 deutschemarks ($1.17)/kg in the third quarter from 1.70 deutschemarks ($1.21)/kg in the second. During the same period, various types of polyethylene fell to about 1.55 deutschemarks ($1.11)/kg from 1.75 deutschemarks ($1.25).
Polypropylene recently has been the strongest price performer among polymers, but it is down to 1.6 deutschemarks ($1.14)/kg from 1.85 deutschemarks ($1.32) in the second quarter.
Glass also pointed out that the third quarter is normally a period of lower demand.
He said, "The industry, however, has taken this as the end of the high price era and has dropped its prices. Producers hope demand will be there when business returns in full force in September."
The recent price surge fueled U.S. and European petrochemical exports to the Far East and China. European petrochemicals producers have been running at more than 90% of capacity. There has been a shortage of polymer production capacity in the Far East, and the Chinese economy has been surging (OGJ, Apr. 17, p. 33).
Now, new ethylene capacity has started up in the Far East, so U.S. and European exports have been backed out by regional products. Also, China's government has restricted imports.
Glass had good news from the petrochemicals producers' view: Feedstock prices also have fallen.
Naphtha is about $155/metric ton in the third quarter, down from $177/metric ton in the second.
Chem Systems is convinced the outlook is not too bleak for petrochemical producers.
Glass said, "Provided producers don't lose their nerve, in the next 6 months the industry should see consolidation of prices and a recovery from their current lower level."
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