Petrochemical manufacturers may heave a sigh of relief with naphtha prices crashing to $880-890 a tonne as against $1,000 a tonne a week ago in the Asian markets, following the Japan crisis.
This has drastically brought down the raw material cost for petrochemical manufacturers which use naphtha as feedstock for manufacturing polyethylene and polypropylene and related polymers and also industrial solvents like benzene, etc.
Companies manufacturing petrochemicals are of the view that low naphtha prices may lead to a decline in polymer prices, but may take a while.
Japan is the third-largest crude importer in the world after the United States and China and is the largest importer of naphtha. Crude prices have fallen from highs of $105 a barrel on Nymex to $97.18 a barrel.
Usually, naphtha prices are nine times the price of crude, said an oil analyst. Since Japan has decided to temporarily shut down 29 per cent of its refineries, the news is outweighing West Asia unrest. Thus, resulting in fall in crude and naphtha prices, he added.
Among petrochemical manufacturers in India, GAIL uses natural gas as feedstock for manufacturing petrochemicals, Haldia petrochemical uses naphtha. Reliance Industries and Indian Oil Corporation use a mix of naphtha and natural gas.
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In fact, company officials are of the view that the decline in industrial activity may outweigh the West Asia turbulence and could further push down the prices of crude and naphtha.
The fall in prices of polymers in response to a decline in naphtha prices may take sometime.
“Polymer manufacturers have been resisting immediate price rise in the domestic market following raw material price rise for quite some time. This is because imports used to be cheaper by Rs 1-2 a kg at any given point in time till recently. The domestic manufacturers have started raising prices only after crude price upsurge recently as imports became expensive than the domestic supply. There is lot of room for the parity price to sustain,” said a marketing official in a PSU petrochemical manufacturing company.
Petrochemical manufacturers had raised prices for the fourth time this week, since January 2011.
Company officials explained the rise was to bring about parity with the import prices which have shot up following high feedstock (crude and naphtha) prices.