Forget petrol prices, it’s benzene that’s driving up plastic packaging costs
RISING oil prices are visible every day at the petrol pump, but an even more dramatic increase in the price of one of the components of petrol is now impacting on a wide range of packaging.
And unlike petrol, which moves up and down from week to week, these price increases are long term and may impact prices for years to come.
A leading newspaper recently reported that high oil prices and a shortage of benzene production capacity around the world were set to supercharge the prices of a range of products and quoted Huntsman Chemical Australia managing director John Bentley as saying: “Everyone is focusing on the record oil price, but benzene prices have almost trebled this year.”
Benzene is a product of oil refining which is added to petrol to boost octane rating and has come under rapidly increasing demand in the pursuit of cleaner fuel, an industry observer said.
“At the same time benzene is a key building block for the household plastics polystyrene and ABS. Polystyrene is commonly found in CD’s, packaging, food containers and sterile hospital equipment as well as white goods such as refrigerators.
“Historically, benzene prices have moved in the range US$200 to 400 per tonne, which was unprofitable for many producers and led to plant closures.
“But prices are now well over US$1100 a tonne with no sign of possible reduction. While the increase in the price of oil has been a factor, benzene is facing a global shortage through lack of capacity and increasing demand for applications such as cleaner petrol,” he said.
Average Asian prices for benzene increased by 83 per cent between March and July 2004 and the impact in Australian dollar terms had been even greater with a 6 per cent drop in the value of the Australian currency over the same period.
John Williamson, General Manager of Polystyrene Australia, said that while oil prices were predicted to continue varying greatly, the price of benzene, and thus polystyrene and ABS, would remain high for some considerable time.
“Oil producing countries are able to rapidly increase or decrease output,” Williamson said, “and every motorist knows that the announcement of a proposed change in output can have an immediate effect on global oil pricing and therefore petrol price at the pump.”
“By contrast benzene production can only increase with the construction of new manufacturing plants which take years to plan and build. With expanded uses for benzene and insufficient global manufacturing capacity, demand is expected to outstrip supply for a long time.”
He said increased global benzene capacity was not expected to come on-stream until 2005 and beyond and in the meantime plastics prices would remain historically high.
“The local resin market cannot be isolated from the global situation as Australia is completely reliant upon imported benzene and global prices,” he said. “It is therefore unavoidable that polystyrene prices will remain high and this will certainly eventually find its way into the consumer market.”
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