Global energy and petrochemical prices appeared to level off for awhile in 2006 when analysts predicted those markets would settle down and drop slightly or at least remain flat.
That didn't happen, and feedstock prices, after a short lull, rose again.
But that's changing ever so slightly, according to Bill Hyde, director of C4 olefins and elastomers at Houston-based Chemical Market Associates Inc. ``Things are calming down, in terms of petrochemicals and natural gas, I think,'' he said.
Hyde was on hand at the International Latex Conference, held Aug. 21-22 in Las Vegas, to deliver a paper titled ``Synthetic Latex Feedstocks: I Thought Things Were Supposed to Get Better; What Happened?''
He was one of the experts who thought costs would improve in late 2006 to early 2007 for raw materials-including butadiene, ethylene, propylene, styrene and methanol-used as feedstocks for synthetic latex.
The prices of those materials are the most significant of the overall costs of latex production, accounting for between 75 and 85 percent of the total.
However, synthetic latex is not the primary use for those materials and pricing conditions are often determined by what happens in other industries and markets, Hyde said after his presentation.
That-coupled with raw material markets not behaving as expected, chemical plant operational problems and delays in bringing additional capacity on line in Asia-had a major impact on the Asian market and a ripple effect on the rest of the world, Hyde said. ``Each of those markets had their own supply-demand dynamic,'' he said.
The result: higher prices for feedstocks.
He pointed out that prices are a combination of production costs-``heavily influenced by swings in feedstocks or overall price drivers such as base energy prices''-and margins, driven more by supply and demand trends.
Things should improve from the standpoint of latex producers, he said, but ``prices won't drop as fast as they rose.''
Hyde's view is that energy prices have peaked and will decline but very slowly because new capacity in the market is not enough to handle demand. ``There's uncertainty in the market,'' he said.
``Our current outlook for the oil and gas markets is for flat to slightly declining prices instead of a more aggressive decline,'' the analyst said. Natural gas prices will likely remain high and flat, he said.
``We have seen an increase in U.S. gasoline prices this year related to a number of refinery outages in the U.S.,'' Hyde said, noting that crude oil prices also have risen.