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Kevin L. Boyle, Consulting

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Q4 2011 Petrochemical Outlook from Kevin L. Boyle, Consulting

Prices and margins will be compressed in the U.S., EU, and Asia in Q4 2011. The drag created by the economy will nip into producers’ profits as prices ease and costs remain steady.

Houston, TX, October 05, 2011 --( Prices & Margins

U.S. ethylene margins based on ethane lost very little steam last quarter, averaging 26¢ per pound versus the 30¢ forecast. The surprise may have been that naphtha based ethylene margins were able to sustain a 16¢ per pound margin on average, based on high propylene and butadiene prices.

U.S. ethylene margins are likely to fall to about 20¢ per pound, on average, as ethylene prices drop and feedstock remains relatively high. The ethane price is forecasted to maintain a premium of $6.50 per mmBTU over natural gas through the quarter. On the supply side, markets are likely to soften due to seasonal factors, stagnant domestic demand, and a cooling in exports. Operating rates which have clocked in at 98-100% as of late will struggle to maintain 90-93% through the quarter.

Polyethylene prices can be expected to lose 5-7¢ per pound over the quarter. Demand is slow during the fourth quarter. Conventional wisdom says that buyers built some inventory during August in anticipation of price increases. It will take time to work off that excess.

PVC and the Chlor-alkali markets can expect to be pushed down over the quarter. U.S. PVC producers have been exporting a large percentage of their capacity to Asia, where prices are beginning to fall further. Caustic soda prices in Europe are falling due to overcapacity to the point where an arb may open up for caustic soda to move to the U.S. Northeast. This should limit any price increases.

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Kevin L. Boyle, Consulting
Kevin L. Boyle

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