Resin Pricing-Europe

INEOS Olefins & Polymers Europe (Rolle, Switzerland) is considering selling its Rosignano, Italy and Sarralbe, France high-density polyethylene (HDPE) plants as part of a broader strategic review. European resin manufacturers, which largely rely on petroleum-derived naphtha for key monomers like ethylene, have been at a huge cost disadvantage to North American firms that utilize natural gas for their petrochemical feedstocks at a time when shale gas exploitation has pushed gas prices to extremely low levels.

In the roadmap for managing resins prices, I explained that risk management is a process whose purpose is to help achieve strategic and economic objectives (e.g. price certainty, increased utilization rates, hoped-for profit margins, etc.) Hedging is part of the process, and hedges should be executed after the objectives and a risk management policy are established.

Plastics processors in Asia continue to benefit on the buy side from mostly flat or slightly lower prices, according to recent reports from plastics pricing service Polymerupdate. Polypropylene seems to be one material bucking the trend, notes Polymerupdate as well as competing plastics pricing service ChemOrbis.

A recent study (Plastics Today; June 27, 2011) indicates processors are happy with an 8% return on sales (gross profit margin) because the historical average is 5% to 7%. If you're happy with 8% and you expect the market to give you that, then there's no reason to change your approach with respect to profit margins. You are content with the status quo and comfortable with the future. Read no more.

In last week's Price Wise [Better Resins Futures], I proposed replacing CME's moribund resins futures contracts with spread contracts against crude oil futures.

Here is a quick look at plastics pricing developments for selected materials in Asia and Europe, as reported by plastics pricing service Polymerupdate. Prices across Asia were in general steady or rising last week while those in Europe tended to fall.

Using the two graphs with this article, processors of plastic packaging film can compare the price they pay to those paid by processors across the globe. The first graph illustrates pricing development this year for LDPE film grade material in four countries plus Southeast Asia. Upon seeing it the immediate response is, "Pity those poor extruders in Italy!"

Plastics pricing information supplier ChemOrbis is reporting that spot prices for ethylene and propylene in Asia have posted significant declines over the past week to reach their lowest levels in months. Slack demand and the drop in crude oil and naptha prices are supporting this downward trend. On the styrenics front, global polystyrene offers are generally down but prices for HIPS retain their large premium over GPPS due to the high cost of butadiene and tight HIPS supply.

According to plastics pricing service ChemOrbis, styrene prices are dropping in Europe and Asia, offering some respite to processors of styrenics-based plastics. In Europe, spot styrene prices have fallen $115/ton (€80/ton) on an FOB NWE basis since the beginning of May, with about half of that drop for this monomer seen in just the past week.

IHS Inc. (Englewood, CO) has acquired petrochemical consulting business, Chemical Market Associates Inc. (CMAI; Houston), making the highly regarded analyst of chemicals and plastics markets its fifth acquisition through the first four months of 2011.