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Petrochemical prices expected to keep rising


Petrochemical prices expected to keep rising

Experts provided their forecasts and opinions regarding the future trends of the world petrochemical secor. The shortage of petrochemicals is likely to keep contributing to the growth of prices for final products - Rupec

In the context of sharp rises in energy prices, the operation of many petrochemical plants is becoming unprofitable. Interruptions in production occur, causing disruptions in petrochemical supply chains. These factors increase the upward pressure on price and accelerate inflation.

Raw material prices for the petrochemical industry began their rapid growth after the world began to emerge from lockdowns caused by the pandemic - companies did not have sufficient time to increase oil and gas production to meet growing demand.

Weather conditions also negatively affected the situation. Cold winters in Asia, the US, and Europe, followed by hot summers have spurred demand for electricity. This led to a shortage of raw materials by the beginning of the heating season. In the European spot markets, the cost of 1,000 cubic meters of gas rose above $ 1,500; in the Asia-Pacific region, in early October, the cost of November spot LNG supplies to the Asia-Pacific region rose to a record $ 1,230 per 1,000 cubic meters.

Europe is currently experiencing a rise in prices for PVC, caustic soda, acetic acid, epoxy resins, ethylene, said Oksana Lukicheva, commodity analyst at Otkritie Broker.

These prices have made many petrochemical plants unprofitable, and shortages of petrochemicals in the market have led to logistics problems, and “just-in-time” companies have lost hundreds of millions, in some cases billions of dollars, in potential profits.

However, the situation is ambiguous, as consumers may refuse to accept such high prices, which may cause enterprises along the entire production chain may begin to close or limit production

Oksana Lukicheva, commodity analyst at Otkritie Broker.

The Chinese market recorded a 10% rise in prices for a wide range of petrochemical products.

Given that China remains a net importer of ethylene and polymers, this leads to a shortage in the market and further increases in prices

Alexey Kalachev, analyst at Finam Group

Russia faced a similar increase in prices for raw materials and petrochemical products. According to the Central Bank of Russia, polyethylene and polypropylene prices rose by 20-30% in the first quarter, and polystyrene by 30%.

Analysts predict a further rise in prices for petrochemicals in Russia, but note that it will not be as significant as in other markets.

It is possible that prices will rise to a lesser extent since raw materials in Russia remain cheaper than in the rest of the world, and the petrochemical business in Russia is one of the most profitable ones

Oksana Lukicheva, Opening Investments

Nevertheless, according to Kalachev, Russian enterprises using polymers as raw materials will face problems that translate into consumer price inflation.

According to most analysts, a price correction in the petrochemical market can only be expected in the first half of 2022.

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