Prices in the $3-trillion-plus global petrochemicals market fell sharply in May, averaging $1,279 per metric ton (/mt). The May average price is down $165, or 11%, from the April average, according to the just-released monthly average of the Platts Global Petrochemical Index (PGPI), a benchmark basket of seven widely used petrochemicals.
The 11% price drop is the largest one-month percentage decline in global petrochemical values since November 2008, when prices fell 38% following the start of the global recession in mid-2008. The May average monthly price was down 16% versus this same period a year ago.
On a market-on-close, last-day-of-May basis, the PGPI had fallen to $1,158/mt, on par with the lowest levels seen in 2011. The end-of-May value is down 18% from the April 30 level.
PLATTS GLOBAL PETROCHEMICAL INDEX IN DOLLARS PER METRIC TONThe daily price reflected as a monthly average
This month-on-month price trend follows a seasonal, second-quarter trend during which petrochemical prices decline through much of the spring and summer months.
The price lull can be attributed to inventories building following turn-around season, and a drop-off in demand as restocking is completed.
However, the scale of this year's April-to-May monthly average price decline has not been seen since 2008 and can be attributed to continuing concerns that petrochemical demand will fall if European Union (EU) economies worsen. In May, European Central Bank (ECB) President Mario Draghi said the EU was at a "crucial moment in its history." At the same time, ECB governing council member Ewald Mowotny suggested that Greece reverting to the drachma would result in a "massive shock." Elections in Greece on June 17 are expected to provide more insight into the potential for Greece to leave the EU.
The global economic uncertainty also has caused upstream energy prices to decline. Dated Brent crude oil prices fell below the $100-per-barrel (/b) level on June 1, down from nearly $120/b on May 1. The 17% drop in oil prices had a knock-on effect in petrochemicals where production costs for several petrochemicals have dropped.
Petrochemicals are used to make plastic, rubber, nylon and other materials for consumer products, packaging, manufacturing, construction, pharmaceuticals, aviation, electronics and nearly every commercial industry.
All seven components of the PGPI were lower in May. Propylene and ethylene, the olefins components of the PGPI, had the largest losses, with both petrochemicals falling 17%. Polypropylene and polyethylene, which are produced from propylene and ethylene, were down 9% and 8%, respectively. The global aromatics markets posted the most shallow declines, with toluene and paraxylene both falling 4%. The global benzene index was down 2%.
May's PGPI movements also reflected changes in the global equity markets, which were also lower month on month. By May's end, the Dow Jones Industrial Average (DJIA) posted a 6% loss; the London Stock Exchange Index (FTSE) fell 8%; the Nikkei 225 fell 10%.
To access a summary of the May performance of each of the seven key petrochemicals included in the PGPI, and to access a price graphic, visit this link: http://www.platts.com/newsfeature/2012/pgpi/index.
The PGPI reflects a compilation of the daily price assessments of physical spot market ethylene, propylene, benzene, toluene, paraxylene, low-density polyethylene (LDPE) and polypropylene as published by Platts and is weighted by the three regions of Asia, Europe and the United States. Used as a price reference, a gauge of sector activity, and a measure of comparison for determining the profitability of selling a barrel of crude oil intact or refining it into products, the PGPI was first published by Platts in August 2007.
Published daily in Platts Petrochemical Alert, a real-time news service, and other Platts publications, the PGPI is anchored by Platts' robust and long-established price assessment methodology and the firm's 100-year history of energy price reporting.
Platts petrochemicals experts are available for media interviews, consult Platts Media Center. For more information on petrochemicals, visit the Platts website at www.platts.com.
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