29 August 2008 13:55 [Source: ICIS news]
By Ed Cox
LONDON (ICIS news)--The benefits and disadvantages of monthly olefins prices continued to be discussed, with a split in preference still clear between the variety of contracts available, said market sources on Friday.
“We have been a supporter of monthly business over the past 10 years,” said one cracker operator still involved in monthly settlements which are not openly reported.
"Previous attempts to expand it across the market were thwarted. We support the system."
A second producer added: “We will talk more about this at the European Petrochemical association (EPCA) meeting at the end of September.
"We don’t expect any major move to monthly from 1 October but do see advantages in monthly pricing for both sides. Much depends on the view of large polymer producers, which have previously favoured quarterly contracts.”
The bi-monthly ethylene settlement was first reported by ICIS pricing in mid-2006. Two of the three producers involved have since pulled out, although consumers, predominantly from the polyvinyl chloride sector, have remained more in favour of the system.
Noted one bi-monthly consumer: “There’s no point having three pricing systems on ethylene. We think monthly pricing is a bad idea, as shown by delayed settlements in the
“It’s a massive effort to agree every month and will add more volatility to the price,” added the source.
"Volatility is not a good source of profitability. We also don’t want a contract price that is based on spot pricing, as in the benzene market."
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