New York, NY, March 17--Top U.S. chemical executives said prices of benchmark chemicals will continue to rise this year despite stalling the last two months, which may have led some investors to sell off shares in recent days.
Chemical analysts and executives say demand weakened in January and February in the key Chinese market because of holidays, leaving producers unable to raise prices for major chemicals like ethylene -- a key ingredient in other chemicals -- and polyethylene, used in plastics.
When investors asked about the recent price stagnation Dow Chemical Co. chief executive Andrew Liveris said, "I'm emphatically telling you it's an aberration."
"It was a head fake. It's all back. The last two weeks of February and March have been strong," he said at a Merrill Lynch investors conference in New York on Wednesday.
Analysts have expected major chemicals like ethylene to see peak prices around 2006 and 2007, helped by strong global demand that is expected to offset energy costs. The last peak was just over a decade ago.
Shares of industry leader Dow fell 3.4 percent to close at $51.64 in trading on the New York Stock Exchange on Wednesday after touching a 52-week high last week.
Analysts said jittery investors took profits when they saw reports of ethylene prices weakening.
Shareholders of chemical companies like Dow have watched the stock climb steadily since mid-2003, and figured it was time to cash in.
Year-to-date, Dow's stock is up 4.3 percent, shadowing the S&P Chemicals index, of which it is a component. The index has climbed 4.33 percent this year.
The broader S&P 500 has fallen 1.97 percent so far in 2005.
Shares of Lyondell Chemical Co. led the downturn on Wednesday, falling 6.92 percent to $30 after they too touched 52-week highs last week. Year-to-date, the stock is up 3.73 percent.
Lyondell CEO Dan Smith told investors at the conference there was still plenty room to climb, both for chemical prices and stock gains. "People were sitting on big (stock) gains and if they wanted to take profits that's fine, but there's a lot more to go here."
