Resin makers have pointed a lot of fingers at the natural gas market this year, blaming the upward spiral of its pricing for their profit woes.
But they could be in luck. Energy consultant Thomas Manning expects prices for natural gas - a key element in production of polyethylene feedstock ethylene - to drop to the $4 per million Btu range by this summer. That's still well above the material's 10-year range of $2-$3, but well below the $7-$9 peak it occupied in late February and early March.
The price could drop even lower if producers react to high prices by beefing up exploration and production, or if crude oil prices drop below $20 per barrel, said Manning, vice president of Houston's Purvin & Gertz consulting firm. He spoke at Chemical Market Associates Inc.'s World Petrochemical Conference, held March 26-27 in Houston.
``We could find a lot more gas in the short-term as the number of drilling rigs goes up,'' Manning said. ``And oil prices are very distorted by current events, but they should stabilize at between $20 and $25 per barrel.''
The chaotic natural gas picture has placed the U.S. in danger of losing its competitiveness in the energy market, according to Jeff Lipton, president and chief executive officer of Nova Chemicals Corp., a Pittsburgh maker of PE, polystyrene and related products.
``[The U.S.] is relying more on natural gas as we've reduced our use of coal and placed restrictions on nuclear power,'' Lipton said at the CMAI event. ``Inventories are low, demand is up and prices are up sharply.
``That's driving down share prices and [profit-to-earnings] ratios. And in 2001 it caused the U.S. chemical industry to have its first trade deficit in decades.''