Players express discontent at Q3 ethylene deal

03 July 2008 14:24  [Source: ICIS news]

LONDON (ICIS news)--European ethylene (C2) producers and consumers alike have expressed mixed reactions on the initial third-quarter ethylene contract which was recently settled up €190/tonne at €1,228/tonne ($1,949/tonne), industry sources said on Thursday.

 

Not surprisingly, several buyers and sellers signalled their discontent at the number as either being too high or too low respectively.

 

“It is a horrible number, any increase was too much,” said a key consumer adding that it understood the [upstream] situation but “would also consider it a mission impossible for downstream”.

 

Another consumer said that it was too high and that demand from its derivative units had already been cut back leaving them several thousand tonnes long for the period.

 

From the producer side, the general comment was that the €190/tonne increase was too low to adequately improve on cracker margins particularly since there was the widely held expectation that crude and naphtha values would continue on their upward trend.

 

“I don’t like it and [I] won’t follow. Just look at crude oil and you can say it is way too low,” said a major producer.

 

“There is no motivation in producing ethylene. We cannot keep losing money,” it added.

 

However, while another major mentioned that it was “still drying its tears”, it believed in reality there would not be an alternative settlement.

 

“We know that we don’t have a chance to settle at a higher level,” it added.

 

Another producer said that it was a fair number and that the reality was that it would stick as it could see no other number emerging.

 

One integrated consumer said that it was a “compromise settlement” after a very difficult couple of weeks of discussion, while another echoed this sentiment saying the contract parties did try to find a compromise amid very challenging negotiations.

 

So far, only two ethylene settlements have been confirmed at €1,228/tonne FD (free delivered) NWE (northwest Europe), representing business between a major producer with two of its consumers.

 

The second-quarter settlement was agreed at €1,038/tonne, while the June-July bi-monthly was done at €1,105/tonne FD NWE.

 

($1 = €0.63)

 

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By: Nel Weddle
+44 20 8652 3214

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