05 December 2005 00:01 [Source: ICB]
European ethylene oxide (EO) producers continue to push ahead with higher prices in the fourth quarter. Numbers increased by €20/tonne in November bringing European contracts up to €1180-1250/tonne FD.
Consumers had pushed hard for a rollover in November. They argued that improved supply both of feedstock and EO, coupled with slower demand as the end of year approaches, justified stable pricing. But in the end sellers had their way.
Logistical difficulties relating to low water levels on the Rhine in Germany caused concern for both EO sellers and ethylene feedstock suppliers, and strengthened sellers’ positions. EO producers needed higher prices in November to further compensate for earlier increases in production costs. They also argued that inventories were still being replenished after earlier outages.
In early November, Shell declared force majeure on EO from its 350 000 tonne/year unit at Moerdijk in the Netherlands. Production at the site was disrupted by strike action.
BASF also suffered EO output problems in October, due to difficulties in obtaining feedstock. This followed an ethylene force majeure declaration, which is expected to be lifted shortly. Ineos also had EO production problems in November.
There are indications of soft-ening market conditions in EO derivative markets, with players reporting lower volume take up from ethanolamines and glycol ethers in second half of November. Players are now seeking to manage their inventory position as year-end approaches.
The November EO increase comes on the back of a massive €150/tonne rise in European contract prices in October. Producers had been in an extremely strong position as a variety of supply problems at both EO units and crackers providing ethylene feedstock left the markets tight. At one point in October, four major ethylene cracker operators had force majeure notices in place. However, most feedstock supply problems have now been resolved.
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