Euro cyclohexane Q1 contract set for major hike

13 January 2006 15:04  [Source: ICIS news]

higher gas costs drive cyclohexane pricesLONDON (ICIS news)--The European cyclohexane first quarter contract delta looks set for a major hike of Euro30/tonne (22-24%) to Euro155-165/tonne, partly driven by higher gas costs, producers and consumers involved in the negotiations said on Friday.

Talk this week focused on a possible contract delta of Euro150-165/tonne, and the range narrowed further on Wednesday, when a range of Euro155-160/tonne came under discussion. However, at the end of the week a major producer had withdrawn its offer of Euro155/tonne, making Euro165/tonne the lowest offer available.

Negotiations for the fourth quarter cyclohexane contract delta had been protracted, and the eventual outcome was a dual settlement at Euro126/tonne and Euro135/tonne. There was even talk of a third settlement at Euro140/tonne, although this was unconfirmed at the time.

Higher gas prices were one of the key factors behind the proposed price hike, particularly in the UK and US. However, mainland European producers felt that gas prices were less important in their justification of a Q1 price increase, and pointed to the tight balance of supply and demand.

Higher gas costs in the US continue to draw European cyclohexane into the transatlantic export market. The strong flow of product from Europe to the US tightened the European market in Q4 and looked set to continue to do so in Q1. Two producers were moving cyclohexane under long-term contracts, but no new spot shipments have been reported.

Despite the December start-up of new capacity at BASF’s Friesenheim Island, Germany site, the European market has not shown any noticeable weakening.

Hydrogen availability is an ongoing problem for some producers, who said cyclohexane prices would have to rise to bid the hydrogen away from competing end-uses.

There was already speculation that the coming year would see various forms of contract pricing, including both the current benzene-plus-delta format, and some other formulae, possibly covering energy and throughput costs. European producers still felt the Q4 cyclohexane contract price was unsatisfactory, and did not reflect the rising cost of energy during 2005.

By: Barbara Ortner
+44 20 8652 3214

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