Petrochemical prices recover on festive demand

The festive season has augured well for the petrochemical market with prices rising for every category.

Petrochemical company officials say prices of polymers have gone up by Rs 1,000-2,000 a tonne since last month.

“Increase in domestic demand is one of the primary reason for prices going up. Moreover, most buyers were maintaining low inventory expecting prices to further go down due to an increase in the installed capacities of petrochemical plants.However the production is not in tune with the increased capacity. There is an additional capacity of 13.5 million tonnes put up in ethylene this year. But the production is yet to hit the market,” said an official of a leading petrochemical public sector company.

Another factor which led to a rise in the domestic consumption was curbs imposed on import of petrochemicals especially polyethylene and polypropylene through antidumping duties. This has made imports costlier, thus making it cheaper to buy in the domestic market.

While polymers may see continued surge in prices in the domestic market, solvents (another category of petrochemicals – benzene, toluene, and xylene) are witnessing a steady rise in prices since a month.

Market traders explained that the correlation between naphtha and crude prices was missing in the global market since April-May due to economic slowdown in Europe. Usually crude being one of the raw material for naphtha, prices of both the products usually move in tandem.

However it was a different story early this year. “Since the euro was depreciating, the naptha producers were finding it attractive to export naptha to Asia even when crude prices were going up in May-June around $80-82 per barrel.

“At this time naptha prices crashed from $700 a tonne to $550 a tonne”, they added.

Currently, even if crude and naphtha prices both are falling, solvents prices are higher due to domestic demand following rush for industrial manufacturers to maintain higher stock. After falling to $ 550 a tonne, naptha prices have been consistently ruling around $635-$640 a tonne. This rise in naphtha prices is pushing up the prices of solvents in the domestic market since it is the raw material for most of the solvents.