Is the Disconnection Between Polymer and Oil Prices Sustainable?

Is the Disconnection Between Polymer and Oil Prices Sustainable?

Oil prices have come under further pressure in recent days.  With standard polymer prices apparently on an upward trajectory, it appears that the long-term correlation between oil price and the price of plastics, including PE, PP and PS, may no longer be valid.

In fact, the price of Brent Crude is today only 25% of its peak value.  In the case of many other world commodities such as staple foodstuffs, the reduction in oil price has been cited as the reason why prices have typically fallen by up to 40%.

The argument that oil price as an input cost should have a similar effect on the price of polymers is even stronger, given the fact that not only does the price of oil have a bearing on the energy costs to produce polymers, but in the majority of cases is almost all of the feedstock component.

On this basis, it appears to be remarkable that the October value of the Price Know-how Polyolefin basket remained at 82% of its May 2011 peak value.  The graph to the right clearly depicts the disconnection that started to take effect in March this year and persists today.

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The concept of a user friendly market report came from feedback about an article published in PRW (Plastics & Rubber Weekly) about the 2011 market outlook to which Plastribution made a significant contribution.

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