30 July 2008 16:45 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--European July cracker margins to date were holding well above May and June monthly averages and were close to first-quarter levels, driven by gains in key olefins and a reduction in feedstock prices, according to market players and ICIS pricing analysis on Wednesday .
Significant rises for third-quarter ethylene (C2), propylene (C3) and butadiene (BD) contracts, up €190/tonne ($297/tonne), €88/tonne and €280/tonne respectively, together with a 15% drop in naphtha values over the past two weeks, saw variable olefins contract margins more than double.
“Things have improved a bit…[the] slowdown in crude and consequently naphtha, have given us reasonable margin,” one producer said, adding that it hoped naphtha would stay in this range for the quarter.
“We got a lucky break,” said another key producer.
Spot margins were recovering more strongly than contract, showing an advantage of €50/tonne, while LPG (liquefied petroleum gas) contracts continued to show an advantage over naphtha at a margin of nearly €40/tonne.
Naphtha was assessed at $981-991/tonne CIF (cost insurance freight) NWE (northwest Europe) by global chemical market intelligence service ICIS pricing, down from the low to mid $1,100s/tonne CIF NWE seen at the end June and early July.
Producers said that few had been predicting the naphtha drop during the contract debate with customers and that conversely they had been afraid that crude would continue to go up.
“We still don’t know where it will go,” said a producer .
Olefins consumers had swallowed the third-quarter rises and said they had no choice but to stay firm on [derivative] pricing and that they would rather sacrifice volume than margin.
At least one derivative producer said that it had dramatically reduced production as a result.
“The contract price settlements for olefins look like a bad joke compared with the developments in crude oil and naphtha,” said a key derivatives producer.
Some sources felt that the recent downturn in feedstock following the settlement of the quarterly contract would only encourage more support from those - notably from the consuming side - who were currently undecided regarding the potential benefits of such a system.
“With naphtha dropping, an August price would be interesting,” a key seller said.
($1 = €0.64)
The weekly margin report for polyethylene (PE) in ?xml:namespace>
For more information on olefins visit ICIS chemical intelligence
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