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Platts petrochemical index breaks 2009 high, but signs of lethargy seen

January 27, 2010 - The Platts Global Petrochemical Index (PGPI) continued its march upwards, closing the week ended January 22 at $1,198.76/mt, surpassing the 2009 high of $1,100.04/mt recorded on December 31, 2009, although the market was showing signs of overheating, Platts data shows. (See related chart: Global Petrochemical, Ethylene Indexes ($/Mt) & Cracker Margin NWE CP (Eur/Mt), Mar 3, 2008 - Jan 25, 2010).

The PGPI is a proxy to show the price performance of major petrochemical products namely ethylene, propylene, benzene, toluene, paraxylene, low density polyethylene and polypropylene.

Starting from a record low of $491/mt on December 5, 2008, the PGPI has since recovered over 144% as confidence returned to the petrochemicals industry following the price debacle which started mid-July 2008.

That month the index recorded an all-time high of $1,679/mt, on July 14.

The combined effect of global production cutbacks and delayed start-ups of Middle Eastern petrochemical plants, plus the strong demand from Chinese consumers as they stockpile inventories ahead of the Lunar New Year holidays, contributed to the strong showing of the PGPI.

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In Europe, polymer converters were reported continuing their restocking efforts as polymer producers continued to laud strong demand, pushing price nominations for February contracts up by as much as 50% over January, market sources said.

In the olefins markets, strong demand for ethylene in Europe, due to outages at Ineos and BASF's steam crackers, pushed import values up from $1,100/mt CIF NWE pre-Christmas 2009 to $1,205/m CIF NWE on January 22. (See related chart: Global Petrochemical, Ethylene Indexes ($/Mt) & Cracker Margin NWE CP (Eur/Mt), Mar 3, 2008 - Jan 25, 2010).

Traders reported volumes were coming from the Americas.

But as buying appetite receded following the restart at BASF's 1.08 million mt/year unit in Antwerp on January 2, and Ineos' 440,000 mt/year unit in Cologne, traders looked to Asia as an outlet.

A spot 5,000 mt ethylene cargo from Pajaritos, Mexico has been fixed by Japanese trading house Mitsui and likely heading to Southeast Asia, according to shipping reports.

Market sources said another trader was looking to move another 5,000 mt US cargo to arrive into Asia in the middle of March.

Asian ethylene prices closed January 22 at $1,354-1,356/mt CFR Northeast Asia, up $199/mt from close of December 31, 2009.

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