Update2nd seller follows Europe €1,120/t C2 Q4

18 September 2008 16:20  [Source: ICIS news]

Sellers agree to ethylene priceLONDON (ICIS news)--A second seller - a major German producer - has supported fourth-quarter ethylene (C2) settlements at €1,120/tonne ($1,600/tonne), down €108/tonne from the third quarter, it said on Thursday.

It had agreed so far with one of its customers, a major polyolefins producer. Both parties fully confirmed the settlement.

Another major-Germany based producer had been first to call the new price, arguing that “the price that has been agreed will enable customers to sell their products competitively in the global market.”

“In order to have a successful business, we need both sustainable margins and operating rates,” the producer added, saying the latter was dependent on demand.

The contract, done on a FD (free delivered) NWE (northwest Europe) basis, was initially between this producer and four of its consumers. Three other consumers had since signalled their acceptance of the new contract.

Confirmation from all but one of the consumers, a major integrated polyolefins producer, was still pending.

The €108/tonne drop compares with the initial quarterly and October-November bi-monthly settlements reported Wednesday at €1,165/tonne, down €63/tonne, although there was still some confusion whether these had been finalised as the buyer concerned had not fully confirmed the agreements.

Several players both from the consuming and producing side reported that they felt the number was unreasonable and not reflective of market fundamentals.

Early reaction to this latest contract development suggested that many felt that it “more realistic” and “more in line with our expectations”.

One buyer said that it would be expecting to follow the €1,120/tonne settlement with its own supplier.

One industry observer said that the “whole (contract) process was a little too quick” this time around, as it had not had the opportunity to discuss contracts with all of its suppliers when news of the initial settlements emerged.

However, others said the speediness of the settlements could be seen as positive, as now there was clarification regarding ethylene pricing moving forward and this would end the turmoil and speculation which had hampered demand over the past few weeks.

There was no further progress on either the propylene (C3) or butadiene (BD) contracts for the fourth quarter.

($1 = €0.70)

For more on ethylene please visit ICIS chemical intelligence
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By: Nel Weddle
+44 20 8652 3214

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