Floor price

Worldwide, approximately 85% of acetone is produced as a coproduct with phenol. The remaining 17% is produced by on-purpose acetone processes such as the hydration of propylene to 2-propanol and the dehydrogenation of 2-propanol to acetone. The cost of production of 2-propanol sets the floor price of acetone as long as the acetone demand exceeds the coproduct acetone supply. However, there is a disparity in the growth rates of phenol and acetone, with phenol demand projected at 3.0%/yr and acetone demand at 2.0%/yr. If this continues, the coproduct supply of acetone will exceed the total acetone demand and on-purpose production of acetone will be forced to shut down the price of acetone is expected to fall below the floor price set by the on-purpose cost production. Projections indicate that such a situation might occur in the world market by 2010. To forestall such a situation, companies such as Mitsui Petrochemical and Shinnippon (Nippon Steel) have built plants without the coproduction of acetone. 

An absolute price floor in the EU ETS could be established if a government institution agreed to purchase an unlimited number of permits at a fixed price. If sellers are guaranteed this floor price by selling to the government, the market price will not fall below the floor. Treasuries, however, are typically reluctant to sign up to such financial liabilities. 

In 1993, the European Union (EU) began reforming its Common Agricultural Policy, which resulted in a decline in their floor price for wheat. The EU also set the floor price of com at a level higher than that of wheat, and put a production quota on potato starch, thereby making wheat the most profitable raw material for manufacturing starch. As a result, EU manufacturers embarked on an expansion of wheat starch... 

In spite of these complexities, two conclusions can be made. First, petroleum coke prices will remain volatile due to cyclical demand in premium markets, fragile market hierarchies, and the orientation toward significant spot purchasing arrangements. The second conclusion is that the absolute "floor" price of petroleum coke (regardless of quality) will be linked to steam coal in Western Europe. 

Ethane prices are generally determined by local circumstances. The floor price for ethane is set often priced according to the price of gas on an energy basis. For example in the US for flexible fuel cracking operations can use both ethane and naphtha if demand falls then ethane can be left in the gas stream and sold as gas. The US Energy Information Administration collates data for the well-head gas price. The data is shown in Figure 3.7. 

There are many periods of low price with the traded price in the vicinity of 300/t. This low price can last for long periods. This effectively sets the floor price which a petrochemical operation should aim to heat - that is have a production cost below the floor price. 

From 2003 to late 2008 there was a progressive rise in the price of oil and hence naphtha. Over the period the price of olefins also rose. In late 2008 both oil price and olefin prices collapsed with olefins heading towards the floor price. 

Financial incentives can help reduce the uncertainty and risk of volatile world oil prices and improve commercial deployment opportunities for synthetic fuel production. Options such as price floors, price ceilings, loan guarantees, product off-take agreements, or other incentives could have a positive impact on the ability for industry to move forward with synthetic fuel projects. 

In Alberta, Canada, a voluntary stewardship program for HDPE milk bottles achieved a provincewide recovery rate of 40%, with 16 communities achieving rates of 70% or more. The program provided a guaranteed floor price to collection organizations along with funds for promotional activities [5]. 

The learning curve concept clearly breaks down if extrapolated too far because there will always be a floor price set by the raw materials and manufacturing cost and also allowing for a fair profit, so that the producers will enter the market and can recuperate their investment and carry out the necessary R D to keep abreast of the competition. 

Futures and options markets can also be used indirectly. Contracts negotiated for physical metal sales, for instance, may include clauses specifying such things as floor prices or price participation arrangements or the like, related to futures maiket prices. 

The period 1982-86 was one of extremely depressed prices. LME prices (in sterling terms) and North American prices reached their low point at about the same time in early 1986, but the latter were additionally undermined by the strength of the US dollar. Lead consumption declined substantially between 1979 and 1982 for cyclical reasons, and indeed it was not until 1987 that 1979 consumption levels were regained. In addition, the industry was plagued by over-capacity which was only pardy resolved by closures in the USA. In the early 1980s, many producers implemented measures to improve efficiency, and cut costs, which had the effect of reducing the floor price for lead. 

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