08 November 2007 15:41 [Source: ICIS news]
By Edward Cox
LONDON (ICIS news)--Olefins’ producers and consumers were fearful that record high upstream costs could hasten a downturn in key chemical markets, but added that European contract demand in 2008 looked healthy.
“Clearly costs for cracker operators have risen sharply over the fourth-quarter. We were anticipating a downturn in European ethylene (C2) around 2010-2011 because of increased ?xml:namespace>
Oil prices have been breaking record highs in recent weeks, with December Brent hitting $95/bbl (€1,398/tonne) on Wednesday.
Of more direct interest, naphtha similarly traded at record highs, with a deal at $828/tonne CIF (cost, insurance, freight) NWE (northwest
Olefins’ consumers stress that speculation has played a great role in the extreme bullish energy trend, adding that costs were off set by the record weak US dollar but they still accept the pressure that top end costs have put on whole olefin chains.
“If our consumers cannot afford to pay plastics prices then it is pretty scary because growth will slow. Demand will drop, we will produce less and in turn buy less propylene,” said one large polypropylene supplier.
“We still predict a good 2008 but we see there are risks and hope that oil prices come down,” added the source.
With both ethylene and propylene spot markets currently quiet in
One large European consumer already recognised the potential for a significant increase in the December-January bi-monthly ethylene agreement, with talks likely to kick off in late November.
In the longer term, global trade balances were expected to alter, especially with either more ethylene or its derivatives coming from the Middle East to
Whether this would be seen in 2010, earlier or later, has been an ongoing talking point in the market.
For now, ethylene consumers were happy with their balances. One said it had postponed some imports from the
“We had some discussions with an Indian supplier on purchasing ethylene but didn’t take it. The producer pointed out that it was happy to keep the naphtha and sell that at current high levels rather than sell it as ethylene,” added the consumer.
($1 = €0.68)
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