After crude oil prices were corrected, there was a follow-up correction in petrochemical prices. The Platts Global Petrochemicals Index has also fallen 12 per cent. However, end-use demand for these crude oil-derivative products has not been affected much in Europe. Stockpiling in China is an area of concern, says Quintella Koh, Managing Editor, Asia, Petrochemicals, The McGraw-Hill Companies, Platts in an interview with Rajesh Bhayani. Edited excerpts:
What is the impact of the current sovereign debt crisis in European countries on polymers and petrochemicals demand?
The end-use demand of these products has not been affected much in most consuming regions like Asia, China and even Europe. This is a good sign. India’s demand is mostly domestic and there is strong buying by Indian users in PVC, PE, PS and ABS.
There are some problems in China as the inventory of polymers, MEG, is piling up and hence would affect fresh buying by Chinese companies. However, the .Chinese inventory has worked as the stabilising factor for the prices of petrochemicals and polymers.
Europe has been an exporter and a weaker euro may help them to export at a lower price...
In fact, a weak euro is one factor why prices are getting support in Europe as there are exports possibilities. However, end-users are not ready to pay high prices for raw materials because they are facing resistance from their consumers to accept higher prices.
Prices of petrochemicals have started correcting. Where are they headed?
In fact, in the first quarter of the year prices have been rising very fast following good demand and refineries have been working near 100 per cent capacities. On April 12, the index of polymer prices developed by Platts known as PGPI has seen an all-time high level of $1,262 per tone and since then it has corrected by almost 12 per cent and is now at $1,108 per tone, while feed stock naphtha’s prices are quite high, many new refineries are gas based which along with China’s rising inventory is acting as a dampening factor for petrochemicals.
However, demand in the pipeline will keep the polymers market healthy for refineries but what is not likely to happen is that prices may not shoot up to the 2007 peak levels.
Very low natural gas prices could lead to further reduction in petrochemicals prices...
New-generation refineries are gas based but if they cut product prices sharply that could compel naphtha-based refineries to reduce capacity utilisation to control losses and a consequential production cut would not let prices fall beyond a point. In fact some end-users of petrochemicals in the textiles segment and other industries are now planning to meet Christmas demands and there are some in-built price stabilisers.