FocusEurope C3 shedding length and weakness

12 June 2008 17:31  [Source: ICIS news]

By Nel Weddle

LONDON (ICIS news)--Spot price developments in the European propylene (C3) market have begun to reverse the weaker trend of recent months, industry sources said on Thursday.

A combination of cracker cutbacks and feed slate changes to stave off reduced margins in the face of soaring naphtha costs had helped to reduce the length in the propylene market evident since the beginning of the year, sources said.

A couple of unplanned cracker outages, namely at Dow Europe’s Terneuzen No 2 cracker in the Nethelands and then latterly at its Tarragona, Spain cracker, had helped to take market sentiment that little bit further with spot deals creeping back into the €800s/tonne CIF (cost, insurance and freight), levels not seen since the first quarter.

Polypropylene (PP) was also looking better as abundant export opportunities due to surging prices in India and elsewhere saw producers looking at better netbacks than in Europe.

PP producers were expected to push more material outside Europe which would likely cause a shortfall in the European market, thereby enabling domestic prices to rise.

In early May, the C3 oversupply was such that some sellers had to resort to exporting surplus volume at very low price levels. These export prices remained private and confidential, but market talk suggested that they were pegged around €700/tonne ($1,094/tonne) FOB (free on board) northwest Europe.  

This compared with second-quarter contract levels of €927/tonne FD (free delivered) NWE northwest Europe.

However, some sources were not so convinced that the firmer propylene spot levels - in some cases talked at as much as €900/tonne CIF - were more than a short-term blip based on cracker outages and possibly some pre-contract posturing.

“There is demand for July in ARA (Amsterdam, Rotterdam and Antwerp) and inland but people just not ready to pay up,” said a trader. Business had still been done in the low €800s/tonne earlier in the week, it added.

There were few buyers other than those with cracker outages, with others full and covered until July and wanting to wait and see how things developed. some sources said, although another was of the opinion that prices had “gone through the roof”.

It was widely accepted that third-quarter contract discussions would be tough given the upstream and downstream disparities.

Consumers were still hoping for a decrease despite the feedstock pressure but producers were most certainly pressing for price hikes. 

“Things are definitely interesting,” said one.

($1 = €0.64)

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By: Nel Weddle
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