Declining Oil Prices & Devalued Euro Creating Volatile, but Profitable Market for European Chemical Producers…for Now, IHS ...
April 28 2015 - 3:00AM
Business Wire
Margins for some polymers, like polyethylene, at positive levels
not seen for years
Crude oil price swings in recent months, combined with a
devalued euro, have created a volatile, but profitable marketplace
for European petrochemical producers, with European steam-crackers
achieving record margins in fourth quarter 2014, according to
analysis from IHS (NYSE: IHS), the leading global source of
critical information and insight.
Petrochemical markets are heavily impacted by changes in the
crude oil price, since crude oil, and in particular, its derivative
naphtha, is an essential steam-cracker feedstock for the production
of gasoline and numerous chemicals. Changes in crude oil prices
influence not only the overall price level for petrochemicals like
olefins and aromatics, but are also a primary driver behind changes
in the supply and demand picture.
“After crude oil prices started dropping in the summer of 2014
descending to a low of approximately U.S. $46 per barrel in January
2015, entire value chains for chemicals and polymers went into a
destocking mode, and buyers began postponing their buying decisions
for as long as possible, waiting for prices to bottom out,” said
Michael Smith, vice president of European chemicals, at IHS
Chemical. “Now, crude oil prices are around $62 per barrel,
consumption is improving, and buyers throughout the value chain are
focused on restocking their inventories in a tight market. The
challenge now for buyers is simply sourcing material, not
negotiating on price, which is a welcomed advantage for European
petrochemical producers. These producers are asking how long will
these good times last? That question will drive much of our
discussion in June, when the European petrochemical market players
will gather in Athens for the IHS Chemical EMEA Aromatics and
Olefins Conference.”
The IHS Chemical EMEA Aromatics and Olefins Conference will be
held June 9-10, 2015, at the Divani Caravel Hotel in Athens. A full
agenda and more information is available at
https://www.ihs.com/events/aromatics-olefins-conference/overview.html
“Polymer and other petrochemical buyers are currently facing a
once in a generation supply squeeze,” said Matthew Thoelke,
director of olefins at IHS Chemical. “For buyers, the current
market scenario is a perfect storm in reverse. At IHS, we see four
main factors contributing to this unusual situation—buyers have an
incentive to restock, European consumption is improving, imports
are at reduced levels thanks to a devalued euro, and lastly, as a
result of these factors, buyers of polymers face a virtual supply
nightmare.
“The weakened euro has certainly been contributing to the
Eurozone’s recent improved performance along with very low oil
prices and stimulus from the European Central Bank, which is
benefitting industries such as petrochemicals,” said Howard Archer,
Ph.D., Chief European and UK Economist, IHS Economics and Country
Risk. “In particular, the weakened euro has provided a significant
boost to the competitiveness of Eurozone manufacturers,
particularly in export markets With the euro climbing off its
mid-March lows and Eurozone growth expected to continue to firm,
IHS thinks it is unlikely that the euro will dip below parity
against the dollar, so the advantage here for European producers,
in terms of the euro disparity, is likely to erode. However, the
euros’ performance could be impacted by whether or not Greece stays
in the Eurozone.
“How long this tight supply petrochemical market will last in
Europe is the big question that is highly dependent upon what
happens with oil prices,” Thoelke said. “Currently, the Brent crude
oil price very stubbornly hovers above the $60 per barrel mark, but
this can change rapidly. Lower crude prices could send petchem
prices tumbling. Fundamentals still point to an oversupplied oil
market, and our colleagues at IHS Energy expect the Brent price to
fall back to $50 per barrel in the coming months, when close to 2
million barrels per day of crude oil will be heading into storage.
If this happens, demand is likely to ease, though producers will
have the opportunity to see a repeat of Q4 2014, as prices would
trail costs downward and margins will once again strengthen.”
To speak with Michael Smith, Matthew Thoelke, or Howard Archer,
please contact Melissa Manning at melissa.manning@ihs.com. For more
information regarding the IHS Chemical EMEA Aromatics and Olefins
Conference, please contact Beth Foote at beth.foote@ihs.com
About IHS
(www.ihs.com)
IHS (NYSE: IHS) is the leading source of information, insight
and analytics in critical areas that shape today’s business
landscape. Businesses and governments in more than 165 countries
around the globe rely on the comprehensive content, expert
independent analysis and flexible delivery methods of IHS to make
high-impact decisions and develop strategies with speed and
confidence. IHS has been in business since 1959 and became a
publicly traded company on the New York Stock Exchange in 2005.
Headquartered in Englewood, Colorado, USA, IHS is committed to
sustainable, profitable growth and employs more than 8,800 people
in 32 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2015
IHS Inc. All rights reserved.
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