Fasten Your Seatbelts for Turbulence in Chemicals Prices
by Brian J. McCormick, guest columnist
In September’s column, we compared first-quarter with second-quarter best and average prices for the basket of 10 chemical commodities that make up the Datamyne US Best Price Benchmark (posted to the Datamyne homepage). This time, in Chart 1, we compare first- and third-quarter trade data (with third quarter including the latest data available through October) on best and average chemicals prices. Note that the trade volumes given below are cumulative.
Compare the 5.3% annualized increase in total average price for our basket of chemicals obtained for third quarter with the 9.6% price spike we calculated in September based on second-quarter data. On its surface, this reduction by nearly half in the rate of increase would seem to be favorable to buyers. However, the upward trend in prices remains in gear headed into the fourth quarter and on through to 2015.
The wild card here is increased trade volume – up 379% – an indicator of increased demand, which may be a significant (if not the sole) contributor to higher chemical prices.
So the apparent dampening of price increases comes smack in the face of almost certain price volatility … and price creep. We may be in for a bumpy ride.
Note that the best price opportunity remains as high as 45% for diligent US buyers who qualify best price producers. But producers, not buyers, are more likely to see, and seize, price opportunities now. Meanwhile buyers can expect to see producers to return to price increases of 10% or more as US consumer demand evolves.
In particular, average prices for cane sugar, soda ash, manganese dioxide, sodium silicates, stearic acid and styrene trended up through October. Prices for ethanol, ethylene, glycerine and magnesium sulfate were about the same or trended slightly down.
We’ll keep our eye on price creep … and watch for a price storm gaining strength.
Chemcost Interactive LLC© 2014
About Brian J. McCormick
Brian J. McCormick was instrumental in developing procurement costing and quality assurance for P&G over a 34-year career. He is the founder and managing director of Chemcost Interactive LLC* (CI), a company offering research and analysis to support cost-efficient supply chain management.
Chemcost can assist Datamyne’s customers in identifying lower price opportunities through consulting and training. Chemcost offers annual subscriptions to global and regional price bulletins on 225 commodities across 9 major chemical spend classes. New! Production cost analyses of key commodity and specialty polymers containing your choice of best or average feedstock prices are available for purchase via PayPal. Contact Chemcost for more information at www.chemcostinteractive.com or call 513-519-7585 in the USA.
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
* Chemcost Interactive is a trademark of Chemcost Interactive LLC
Date posted: December 31, 2014