 "Petrochemicals prices start correcting")
Though crude oil prices had been declining through the past couple of months, its derivatives didn't see a fall, as refining plants had started operations late, affecting supplies. Now, however, petrochemical prices are seeing a correction and this has been aided by a drop in naphtha prices.
The fall in petrochemical prices might hit synthetic yarn makers, though plastic makers might benefit.
After touching a peak of $115 a barrel on June 16, Brent crude oil prices now stand at about $95 a barrel. Prices of monoethylene glycol (MEG) and purified terephthalic acid (PTA), key raw material for polyester yarn, have fallen six per cent and 7.5 per cent, respectively, in the past month. At a time when cotton prices have crashed, the sharp fall has hit the yarn sector.
The price of texturised roto-80 benchmark synthetic yarn has fallen from Rs 130 a kg a few months ago to Rs 115 a kg, while cotton prices are down 15-20 per cent.
Jayesh Pathak, president of the Bombay Yarn Merchants Association, said, "There is a crisis of confidence in the synthetic yarn sector; in an environment of falling prices, everybody is waiting before buying and the stock pipeline has turned empty. The whole value chain is affected, as the sector is recording losses. Those with high-cost stocks are the worst affected." He adds demand might improve once prices stabilise.
Prema Viswanathan, associate editorial director (petrochemicals), Platts, says, "The outlook for Asian polyester and its feed stocks — both MEG and PTA — has been bearish for some time. MEG traders have been spooked by the bearish market sentiment and have been selling prompt arrival cargoes aggressively, as well as shorting forward cargoes. For PTA, spot transactions have been significantly reduced due to PTA producers' desire to link PTA spot prices to PX (paraxylene) feedstock prices and the general sluggish polyester performance."
In Asia, the outlook for MEG and PTA hinges on a revival in demand for polyester in China.
Plastic raw material prices have also started correcting. The price of polyvinyl chloride stood at $1,110 a tonne a couple of months ago; now, it has fallen to $1,010 a tonne.
As a result, domestic producers have cut prices 10 per cent to Rs 72,500 a tonne.
High-density polyethylene has also seen moderation in prices.
M P Taparia, managing director of Supreme Industry, a plastic product maker, said, "Overall, demand is good this year. We will see 10 per cent growth, which is higher than last year. So far, we have been able to pass on the cost push."
Viswanathan of Platts says, "In the case of polymers, the outlook is mixed. Demand for PE and PP continues to be weak in China. However, PE prices could face upward pressure to protect margins, as ethylene prices continue to rise because of tight supply. For PP, the situation is slightly different, as its feedstock, propylene, faces downward pressure because of a glut---about 3.5 million tones a year is expected by mid-2015 from six new propane-dehydrogenation plants in China."
Benzene has also seen a sharp fall in the past two months. According to Bloomberg data, the price of the commodity in India stood at $1,385 a tonne in July-end; now, this has fallen to $1,205. Prices are at a two-year low as demand in Asia has fallen and the demand for derivatives such as styrene, phenol and caprolactam in China is weak.
Janak Ladhani, managing director of Sonkamal, a big major of benzene derivatives such as acetone and phenol, says in the domestic market, the phenol stock is low and, therefore, prices have remained elevated, though a mild correction has been seen recently. Acetone, used as solvent in pharmaceuticals, has also seen some price correction, in line with global prices.
According to Platts, there could be more pressure on benzene prices in Asia, as production capacity is set to rise this year.
The fall in petrochemical prices might hit synthetic yarn makers, though plastic makers might benefit.
After touching a peak of $115 a barrel on June 16, Brent crude oil prices now stand at about $95 a barrel. Prices of monoethylene glycol (MEG) and purified terephthalic acid (PTA), key raw material for polyester yarn, have fallen six per cent and 7.5 per cent, respectively, in the past month. At a time when cotton prices have crashed, the sharp fall has hit the yarn sector.
The price of texturised roto-80 benchmark synthetic yarn has fallen from Rs 130 a kg a few months ago to Rs 115 a kg, while cotton prices are down 15-20 per cent.
Jayesh Pathak, president of the Bombay Yarn Merchants Association, said, "There is a crisis of confidence in the synthetic yarn sector; in an environment of falling prices, everybody is waiting before buying and the stock pipeline has turned empty. The whole value chain is affected, as the sector is recording losses. Those with high-cost stocks are the worst affected." He adds demand might improve once prices stabilise.
Prema Viswanathan, associate editorial director (petrochemicals), Platts, says, "The outlook for Asian polyester and its feed stocks — both MEG and PTA — has been bearish for some time. MEG traders have been spooked by the bearish market sentiment and have been selling prompt arrival cargoes aggressively, as well as shorting forward cargoes. For PTA, spot transactions have been significantly reduced due to PTA producers' desire to link PTA spot prices to PX (paraxylene) feedstock prices and the general sluggish polyester performance."
In Asia, the outlook for MEG and PTA hinges on a revival in demand for polyester in China.
Plastic raw material prices have also started correcting. The price of polyvinyl chloride stood at $1,110 a tonne a couple of months ago; now, it has fallen to $1,010 a tonne.
As a result, domestic producers have cut prices 10 per cent to Rs 72,500 a tonne.
High-density polyethylene has also seen moderation in prices.
M P Taparia, managing director of Supreme Industry, a plastic product maker, said, "Overall, demand is good this year. We will see 10 per cent growth, which is higher than last year. So far, we have been able to pass on the cost push."
Viswanathan of Platts says, "In the case of polymers, the outlook is mixed. Demand for PE and PP continues to be weak in China. However, PE prices could face upward pressure to protect margins, as ethylene prices continue to rise because of tight supply. For PP, the situation is slightly different, as its feedstock, propylene, faces downward pressure because of a glut---about 3.5 million tones a year is expected by mid-2015 from six new propane-dehydrogenation plants in China."
Benzene has also seen a sharp fall in the past two months. According to Bloomberg data, the price of the commodity in India stood at $1,385 a tonne in July-end; now, this has fallen to $1,205. Prices are at a two-year low as demand in Asia has fallen and the demand for derivatives such as styrene, phenol and caprolactam in China is weak.
Janak Ladhani, managing director of Sonkamal, a big major of benzene derivatives such as acetone and phenol, says in the domestic market, the phenol stock is low and, therefore, prices have remained elevated, though a mild correction has been seen recently. Acetone, used as solvent in pharmaceuticals, has also seen some price correction, in line with global prices.
According to Platts, there could be more pressure on benzene prices in Asia, as production capacity is set to rise this year.