20 May 2009 15:36 [Source: ICIS news]
LONDON (ICIS news)--The pressure is on for a marginal increase in olefins prices in Europe for June due to higher feedstock costs, but the outlook for producers is far from bright.
Polyethylene demand is poor, to say the least, and the draw from exports has disappeared. The propylene chain is better given the demand pull from derivatives exports to ?xml:namespace>
It looks as though it will be a difficult summer for some of
The business clearly has been buoyed by demand from Asia and the pull of its higher prices, but companies face the crunch of a still significantly depressed
Given the steep fall in economic output across the region, that is hardly surprising. Key customer industries for chemicals, including automobiles, construction and large-scale electrical, are still depressed. Workers across the continent are on short-working time.
The fiscal stimulus measures in the
This depressed level of economic activity translates directly into petrochemicals demand, or rather the lack of it. There has been some uptick in output since the beginning of the year but only from a very low level. The trade group Cefic suggests that chemicals output will continue to rise, although business activity is likely to remain depressed.
This past week's contract naphtha margins had slipped by around €10/tonne ($14/tonne) due to higher naphtha prices. Slightly higher co-product credits and a weaker US dollar against the euro were unable to outweigh higher feedstock costs, giving further incentive for a push to higher prices in June.
Spot naphtha margins remained poor but were higher due to higher spot ethylene and gasoline prices, according to the latest ICIS European ethylene margin report.
Integrated polyethylene (PE) players were only making improved returns from the cracker in the second week in May while, PE demand remained depressed.
Domestic business, however, was poor, with demand still weak down the chain. Not much was expected of PE buyers, whose own customers weren’t buying. And there is little to suggest that they might come back more strongly over the seasonally quiet summer period.
Polypropylene exports had also been strong, helping European producers maintain plant loadings. And while domestic business remained depressed, there were signs of automotive demand improving, albeit from a very low base. Food packaging remained the only real bright spot.
A difficult summer beckons for most players in both chains in Europe, with only
The feeling in the market is that new offers from the
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