Players see ethylene price rise ahead of EPL meet

14 June 2007 10:54  [Source: ICIS news]

LONDON (ICIS news)--Market players at Thursday's European Petrochemical Luncheon in Bratislava are expected to focus on third-quarter contract discussions in the olefins sector, with aromatics sources looking at bearish spot sentiment.

 

Sellers and buyers of ethylene and propylene have so far been tight lipped on where they expected contracts to end up, although increases were widely anticipated because of higher upstream naphtha costs.

 

The June-July bi-monthly ethylene contract was agreed in mid-to-late May at €925/tonne ($1,233/tonne) FD (free delivered) NWE (northwest Europe), up €40/tonne.

 

Most sources agreed that this gave a good indication of price trends for the upcoming quarter for both ethylene and propylene, although some consumers noted that upstream naphtha costs have eased in the past month and this could limit hikes.

 

Spot ethylene prices have been pegged in the low €900s/tonne FD NWE pipeline in recent weeks, with little business openly reported.

 

Propylene prices rose last week to €920-930/tonne CIF (cost, insurance and freight) NWE, up €10-40/tonne on the back of concerns over supply. However, a deal was reported on Wednesday 13 June at €915/tonne CIF Stade for 2,000 tonnes, and some sources said that derivative polypropylene issues would mean an increase in prompt propylene supply.

 

Sellers remained confident that supply would be limited in the second half of 2007 in the build-up to cracker shutdowns between August and October.

 

On aromatics, the main issue for discussion was thought to be sliding benzene spot prices, which have slumped by $115/tonne since the June contract was settled on 31 May, despite market fundamentals pointing to a tight market.

 

June spot prices were last assessed at $1,040-1,050/tonne CIF ARA (Amsterdam, Rotterdam, Antwerp) on Wednesday evening, down from $1,155-1,165/tonne CIF ARA on 31 May.

 

Market players had little explanation for what caused this decrease as the force majeure at INEOS Olefins’ 295,000 tonne/year Grangemouth benzene plant was expected to tighten the market together with strong demand from the styrene industry.

 

The falling benzene numbers had an eroding effect on the styrene market, where prices fell even more dramatically from $1,540-1,560/tonne FOB (free on board) Rotterdam on 31 May to close at $1,310-1,330/tonne on 13 June.

 

Market players said the $130/tonne crash was because most June spot positions had been covered in May, and those buyers who needed material were now holding back in order to see how low styrene would fall.

 

Toluene prices fell by $80/tonne in the first two weeks of June due to weak European demand, and weak blend values for gasoline blending, which kept the arbitrage window to the US closed.

 

Prices fell from $860-870/tonne FOB Rotterdam on 31 May to $780-790/tonne on 13 June, and some traders expected the downward trend to continue as a backwardation in the US gasoline market was unlikely to attract European toluene in the near future.

 

($1 = €0.75)

 

Jorn Steffensen contributed to this article

 

By: Edward Cox
+44 20 8652 3214

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