11 January 2006 11:08 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--European ethylene and propylene (olefins) markets are expected to remain strong on buoyant derivative demand and scheduled cracker maintenances throughout 2006, market sources said.
Last year was described as a rollercoaster year for olefins pricing in Europe. Jumps in raw material costs coupled with a number of unplanned production issues and swings in derivatives demand – notably that of the polymers polyethylene (PE) and polypropylene (PP) – led to increased price volatility.
Ethylene (C2) Aethylen Rohrleitungs Gesellschaft (ARG) spot pipeline prices reached a low of Euro485/tonne free delivered (FD) Northwest Europe (NWE) in June 2005, having started the year at Euro960/tonne FD NWE in January. The market then surged to an historical peak at Euro1,150/tonne FD NWE in October in the aftermath of the hurricane disruption in the US.
European ethylene contract prices in 2005
Propylene (C3) spot prices were less volatile than ethylene but nevertheless moved within a broad price range of Euro500-910/tonne cost, insurance, freight (CIF) NWE throughout the course of 2005.
European propylene contract prices in 2005
Such price volatility led to widespread calls for a change in the olefins contract mechanism – currently largely quarterly – to either monthly or, as has just recently been mooted, a bi-monthly system. Record deltas were suffered in the move from Q3 to Q4, when increases of Euro185/tonne and Euro170/tonne were secured for ethylene and propylene respectively.
Key industry players expected discussions on an acceptable and representative contract system to progress through 2006. Both producers and consumers were keen to avoid the large price swings seen from Q3 to Q4 and to promote more stability.
Currently, spot prices are hovering around Euro800/tonne for both C2 and C3. There is upwards potential, with the yearly cracker maintenance turnaround season due to begin a little earlier than usual with Dow’s 660,000 tonne/year Tarragona, Spain unit in January-February.
In the March-April period, Dow will shut its 600,000 tonne/year Terneuzen 3 Dutch cracker for six weeks, BASF will undergo a turnaround at one of its Ludwigshafen crackers in Germany and the 560,000 tonne/year No 2 Antwerp, Belgium, cracker of Total joint venture Fina Antwerp Olefins (FAO) will also be down for planned maintenance.
However, for many market players, the planned shutdowns in August-September of Basell’s 760,000 tonne/year Wesseling 6 cracker in Germany and of Shell’s 900,000 tonne/year Dutch cracker at Moerdijk will be the key crunch point, taking a substantial amount of production out of the European arena.
In addition, market sources said no new capacity would come onstream in Europe and there would be little or no expansion to existing units. But demand growth – although slowing – is still expected to be just over 2% this year.
One area to watch will be the Asian market. Good levels of growth and a significant shutdown slate is expected to keep regional pricing firm, supporting the global market.
The only potential blot on the horizon is the start-up of new capacity in ?xml:namespace>
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections