INTERACTIVE INSIGHT: ICIS global price index down 15% in second quarter

LONDON (ICIS)–Petrochemical and polymer prices have come under increasing downward pressure as end use markets slow and the oil price falls.

The ICIS Petrochemical Index (IPEX) shows how difficult the first half was for producers with the indexes for the three main producing and consuming regions trending downwards.

Demand for many petrochemicals and plastics has come under pressure as end-use markets as diverse as automobiles and textiles have felt the pinch.

These markets are important in China, of course. And it is there that the pressures from the trade dispute with the US, from the steps taken to tackle shadow lending, and also from environmental and health & Safety clampdowns have been felt.

The fact that so much product has been trapped in inventory suggests that the consumer markets on which upstream petrochemicals rely are in trouble.

A 17% fall in the northeast Asia ethylene price in June is worrying, reflecting in large part the lack of demand for important ethylene-based intermediates downstream

It is the demand side as much as the feedstock cost that is driving chemical prices. And overall, that trend is down.

The expected resumption of US-China trade talks may have lifted financial markets. And a falling oil price will reduce costs for many chemical producers, help broaden spreads and lift margins. But if demand falls away further the second half outturn will not be good.

The impact of China’s slowdown is felt worldwide. It has played a part in reduced output from Germany’s chemical industry, for example. The Germany trade group, the VCI, on Wednesday reported a 2.5% drop in output from the sector in the first half. Petrochemicals output was flat while polymers production was down 7%.

Combine flat or reduced output and a 13% fall in the northwest Europe IPEX in the first half of 2019 you do not have a pretty picture.

In June the ICIS indexes were down by more than 2% month on month in each region.

Looking back, the downturn in prices in November December last year was followed by a pressured January and February but there was some pick up in prices in March/April before the run downward again in June.

The ICIS price baskets follow crude oil and the chart here showing the global IPEX and the Brent marker tells a tale. The impact of slower demand growth, however, has become more influential on petrochemical markets with producers seeking to balance output against demand.

The northeast Asia IPEX in June was down 21% year on year. The global IPEX for the month was down 18% on the same basis.

The northeast Asia IPEX was down 19% year on year in the second quarter with the global IPEX down 15%.

The ICIS petrochemical index tracks the movement of 12 major petrochemicals and polymers: ethylene, propylene, butadiene, benzene, toluene, paraxylene (PX), polyethylene (PE), polypropylene (PP), styrene, polystyrene (PS), methanol and polyvinyl chloride (PVC) with the regional indexes weighted by capacity.

Global and regional IPEX data are available here

By Nigel Davis