18 September 2008 12:59 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--European ethylene (C2) players are not clear whether initial fourth-quarter and bi-monthly contracts, settled down €63/tonne ($90/tonne) at €1,165 tonne on Wednesday, have been fully agreed, market sources said on Thursday.
However, while there had been direct confirmation from the seller concerned - a key ethylene supplier, the position of the participating consumer - a polyvinyl chloride (PVC) producer, had not yet been clarified.
Latest reports suggested that the buying party had yet to discuss its acceptance of the new contract prices internally and that therefore the initial settlements had not been finalised.
The seller concerned declined to comment further on the situation on Thursday, except for confirming once again that it had had a clear agreement at €1,165/tonne FD NWE.
The buyer said that it would clarify its position on Friday.
Industry reaction to the settlements was one of astonishment from buyers and sellers alike.
“We think it’s not the right number, it’s not a fair reflection of the market,” said one major merchant seller, who added that it was still in discussion with its buyers.
Added an ethylene producer: “I am not surprised by the seller’s proposal, but I am surprised by the (reported) acceptance.
“Watching naphtha levels that we’ve had recently, (I) was expecting a little more in terms of a reduction.”
The producer added that it had a broader view of the potential costs over the fourth quarter, and shared the view that current downward developments on crude and naphtha would most likely be temporary.
Ethylene buyers were, not surprisingly, united in their reactions to the €63/tonne decrease.
Polyethylene (PE) producers had already indicated their feelings about the settlements, saying that the decrease did not reflect fundamentals and that they were not taking the settlement seriously at this stage.
Other derivatives producers were taking a similar stance.
“It’s not a reasonable settlement” said one key consumer.
Added a PVC producer: “We cannot follow this type of price, we don’t understand,” while another consumer said: “It’s certainly not in line with our thinking and certainly not in line with our customers’ thinking either.”
“The decrease is too low for sure, 100%,” the buyer added.
Consumers said that they had been focused on a three-digit decrease.
One consumer said that it recognised that €100/tonne was a psychological barrier for some sellers, but this was justifiable on the basis of current supply and demand, not only the recent downwards shift in crude and naphtha values.
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Many players said another number would be likely to emerge.
This would be unusual, but it was possible for another figure to become the European contract benchmark, as evidenced by the situation which developed on the European butadiene market for the third quarter.
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