C3 views diverge in initial Europe Q2 olefins talk

06 March 2008 14:08  [Source: ICIS news]

LONDON (ICIS news)--European second-quarter propylene (C3) contract negotiations were expected to be trickier than those for ethylene (C2), market sources said on Thursday, with C3 buyers and sellers steeling themselves for a tough round of discussions.

High upstream crude and naphtha costs were expected to push producers towards an increase on the €945/tonne ($1,454/tonne) FD (free delivered) northwest Europe (NWE) first-quarter settlement.

But consumers felt that weak spot levels and a balanced-to-long supply and demand situation should lead only to a decrease or at the very least, a rollover.

Spot C3 has languished in the mid €800s/tonne CIF (cost insurance freight) NWE for most of the first-quarter, well below net contract value. Lower spot levels were also rumoured achieved on some opportunistic deep-sea volumes.

No sources were willing to speculate in terms of numbers at this very early stage.

Supply was often described as very long and close to problematic saved only by a couple of unplanned production issues in Germany and France.

Producers pointed to the upcoming spring turnaround season at a time when demand was traditionally at its peak but some admitted that the slate was much lower than in the previous two years.

Buyers said the weak US dollar had done much to lessen the impact of increased naphtha.

In comparison, C2 contract discussions were largely expected to be routine with some buyers and sellers anticipating only minimal change from the current first-quarter level of €1,023/tonne ($1,574/tonne) FD NWE.

One source said that it expected producers to initially go for an increase in the region of €25-30/tonne but that a rollover was the likely outcome, with another saying that, providing current fundamentals remained unchanged, an increase of €10-15/tonne was feasible.

A couple mentioned that second-quarter ethylene could be influenced by the propylene settlement and that for example, a decrease for C3 would put pressure on the ethylene segment to maintain cracker margins.

Full discussions on both C2 and C3 were expected to get under way in the next week or two, but sources cautioned that the settlements might take some time due to upcoming seasonal holidays and the National Petroleum Refiners Association conference from 31 March-1 April.

($1= €0.65)

For more on C2 and C3 visit ICIS chemical intelligence

By: Nel Weddle
+44 20 8652 3214

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