Petrochemical demand on decline amid soft global economy - report
Prices for petrochemicals, used as the raw materials for many intermediates, derivatives and downstream chemicals, declined in July, representing the first decrease in 10 months, according to a report issued Wednesday by Fitch Ratings.
The decline was driven by a soft patch in the global economic recovery in the second quarter of 2011, the credit firm said.
The trend resulted in weaker demand for chemical products and, coupled with lower crude oil prices and continuing low natural gas prices in North America, eased some of the pressure on raw material costs inflation, particularly in the US.
The trend also reflects softer exports and inventory adjustments, Fitch said.
Short term, the lower prices ease some of the pressure on chemicals producers' operating margins.
However, it does not bring long-term relief. Prices of almost all chemicals building blocks as well as costs for many other commodity chemicals still run well above their long-term averages and many chemical supply chains remain tight.
Most chemicals companies continue to view raw material cost inflation as a key concern for their businesses, the agency said.
Elevated price levels would be reversed in a downside scenario of a double-dip recession, which would adversely affect demand for chemicals and, in turn, correct raw material costs downwards.
The full report is available at the Fitch Ratings website.
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