A month ago, Nigel Davis called attention in his ICIS Insight column to the alarming fall taking place in US ethylene values. He noted that “inventories seem to have filled“, and presciently concluded that “buyers have been on the look-out for the turn and, by all accounts, expect any downward movement to be swift and deep“.
He suggested it meant companies should remain “cautious about the continued strength of the chemicals recovery“. And as the above chart from the excellent ICIS Weekly Margin report shows, Asian prices for major ethylene derivatives such as high density polyethylene (HDPE, red line) are now also falling quite steeply.
As always at turning points, the picture is still mixed:
• Lower feedstock costs, due to the plunge in oil prices, have enabled integrated producers to retain good margins (yellow block) so far.
• But a warning sign can be seen in the standalone margins for Asian HDPE producers (red block), which have remained negative.
• And my fellow blogger Malini Hariharan notes that China’s polymer stocks are reportedly “close to record levels“.
Helping you navigate the new normal