KARACHI: Ethylene, used to produce plastic packaging, bottles, film, hits multi-year high ($1,505/ton) since 2014, signaling strong upstream momentum but simultaneously squeezing downstream petrochemical margins as cost pressures intensify across global markets.
Margin pressure deepens
While PVC prices edged up by $10/ton during the week, the increase failed to keep pace with the sharp $60/ton surge in ethylene prices. This imbalance led to a contraction in the PVC-Ethylene spread by $19/ton on a weekly basis, reflecting a 4% decline in core margins.
The divergence highlights growing stress within the petrochemical value chain, where producers of downstream products are struggling to pass on rising input costs to end consumers.
Global pricing mismatch
The upward revision in PVC prices across key markets such as the US, China, and Brazil indicates some pricing power, but not enough to offset feedstock inflation. This suggests that demand conditions remain relatively fragile, limiting producers’ ability to fully transfer higher costs.
Meanwhile, other segments of the chemical chain showed mixed trends. PTA and PX prices declined, while MEG posted gains, pointing to uneven demand recovery across industrial sectors.
Analysts believe the ongoing volatility reflects structural imbalances, where upstream tightness contrasts with subdued downstream demand, particularly in packaging and construction-linked products.
If sustained, the margin compression could impact production decisions and profitability across global petrochemical players, with ripple effects on import-dependent economies like Pakistan.