TOKYO -- The spot price of ethylene, a raw material used to make petrochemical products, is standing at a six-month low of around $950 a ton in East Asia, down 30% from its June high. Declining crude oil prices is no longer the single reason. A decrease in China's automobile production is also pushing down demand for ethylene. Ethylene prices are falling faster than raw material costs, and such downtrend will likely hurt the profitability of Japanese chemical manufacturers.
Japan's chemical makers have been operating their production facilities at high capacity, and will likely take a hit from the supply-demand imbalance. China's daily auto production for July dropped 11.2% on the year, reportedly having a huge impact on synthetic resin and many other petrochemical products used in cars. According to an official at Japanese chemical maker Sumitomo Chemical, China's slowing economic growth only slightly influenced ethylene prices in the April-June period, because many petrochemical products are used for daily necessities.
