Players seek solution for quarterly Europe C2/C3

14 November 2008 17:05  [Source: ICIS news]

LONDON (ICIS news)--One key European olefins producer is talking to its customers to find a new price basis for December and the first quarter of 2009, following recent calls by consumers for a renegotiation of fourth-quarter contracts, it said on Friday.

The aim was “to offer a release to the downstream markets in December”, it added. Extremely poor demand and much weaker feedstock levels were behind the calls from a renegotiation from consumers.

The initiative centred on settling the first-quarter 2009 contract price in November, with validity starting in December. The producer said that discussions were ongoing and that it wanted to reach clarity and certainty about the new price basis.

At the time of writing it was not clear how customers had taken such an approach and even whether it would achieve its goal in encouraging more demand.

Last week, ethylene consumers said that the oppressively high fourth quarter contract price had damaged derivatives businesses far more than the economic slowdown.

Customers had destocked earlier and to a greater extent in anticipation of a massive downwards correction on the contract price.

“Special” deals and a review of discounts on a case-by-case within the quarterly framework had been alluded to over recent weeks in an attempt to mitigate the crisis enveloping the whole supply chain

However, for some a renegotiation of the benchmark contract price was key to supporting both upstream and downstream businesses.

Ethylene (C2) was still considered the worst performer in the olefins basket with spot activity non-existent for several weeks and pricing notionally pegged below €600/tonne ($759/tonne) FD (free delivered) NWE (northwest Europe), according to global chemical market intelligence service ICIS pricing.

However, many sellers said that ethylene could not be sold “at any price”.

Propylene (C3) had been supported up til now by cracker cuts and better demand, but was now also slipping fast.

Trade offers at €550/tonne CIF (cost, insurance, freight) NWE were being rejected, and spot prices were seen as academic by most sources.

Fourth-quarter ethylene and propylene contract prices were settled at €1,120/tonne FD NWE and €953/tonne FD NWE, down €108/tonne and €62/tonne respectively from the previous quarter.

($1 = €0.79)

For more on C2 and C3 visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Nel Weddle
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly