26 June 2008 12:39 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--Daily naphtha price swings are adding to the difficulties in reaching realistic third-quarter ethylene (C2) and propylene (C3) contract settlements, market sources said on Thursday.
Naphtha closed at $1,130/tonne (€723/tonne) CIF (cost insurance freight) northwest Europe on Tuesday and then briefly slipped under $1,100/tonne on Wednesday, before regaining some ground, according to global chemical market intelligence service ICIS pricing.
“[With this happening] who wants to commit to a price?” said one producer.
Contract parties were already involved in some tough negotiations given the wide spread of price ideas, including increments in some cases of an unprecedented magnitude.
“It’s never easy, but it’s certainly challenging this time around,” said one integrated polyolefins producer.
Most sources echoed this sentiment, with many saying that they had never seen such a time where buyers’ and sellers’ positions were so firmly entrenched.
"I definitely think it [the settlements] will take place after 1 July,” said a source.
Most market observers said that they anticipated a three-digit increase for ethylene and a two-digit increase for propylene. Others predicted that settlements would be within a narrower range of plus €100-200/tonne and a rollover to plus €80/tonne respectively.
Last week, pricing indications for ethylene ranged from up to €275/tonne on the selling side compared with €80/tonne on the buying side, while a rollover to plus €150/tonne was mooted for propylene.
Negative cracker margins were driving producers’ calls for increases and while most consumers recognised this and went some way to accepting that significant increases were justified, some felt that the downstream derivative situation was not being adequately taken into account.
“All the compromise has been from buyers so far, sellers are not stepping up to the plate to make a settlement,” said another integrated polyolefins producer.
Second-quarter values stand at €1,038/tonne FD NWE and €927/tonne FD NWE for ethylene and propylene respectively.
($1 = €0.64)
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